Stamp Duty Changes Result in Major Decline in Mortgage Approvals
The partial withdrawal of the stamp duty holiday did little to quell the appetites of those still looking to make the best of the remaining incentive; for those who act fast, there is still the opportunity to make considerable savings by sidestepping stamp duty liability on property purchases that fall below the £250,000 threshold.
Prior to the end of June, the threshold had been held at a much higher £500,000 for several months.
The housing market maintained much of its momentum throughout July and August, in spite of predictions of a major slowdown. However, new figures from the Bank of England suggest that mortgage approvals have taken a tumble throughout July.
A total of 75,200 mortgages were approved in July, compared to the 80,300 approved in June, this indicates performance better than the same period last year, but significantly down on pre-pandemic norms.
Signs of a Return to Normality
House builders and estate agents experienced unprecedented demand throughout most of the pandemic, movers and first-time buyers alike were forced to rethink their priorities during lockdown, which combined with the temporary stamp duty holiday triggered frenzied competition for desirable homes.
As the countdown to the full withdrawal of the stamp duty incentive continues, experts are now expecting to see gradual signs of a return to normality.
“We’re likely to see more volatility in sales over the coming months as the tax break tapers further, but all-in-all this marks the beginning of a return to more normal housing market conditions,” commented Hina Bhudia, partner at Knight Frank Finance.
Others believe that the next couple of months at least could see the housing market’s momentum continue, if not step up somewhat while the opportunity remains.
“We may see another increase in activity in the next couple of months, as buyers line up transactions before the stamp duty threshold returns to its normal level of £125,000 from October,” said Martin Beck, senior economic advisor to the EY ITEM Club.
“But once the stamp duty holiday has ended, the EY ITEM Club expects demand to soften and that there will be a modest correction in prices.”
A Strong Future in Uncertain Times
Despite the fact that the economic outlook for the UK in general is anything but certain, the housing market is expected to continue performing with strength indefinitely.
“We suspect that home purchase demand will remain robust even after the stamp duty holiday ends altogether in October,” said Andrew Wishart, property economist at consultancy Capital Economics.
“Web searches for the property portals Rightmove & Zoopla remain well above pre-virus levels.”