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Stamp Duty Did You Know?

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The current stamp duty holiday on properties valued up to £500,000 comes to an end on 30th June but did you know that you can still enjoy a stamp duty holiday on properties valued up to £250,000 when your purchase completes by 30th September.  The additional SDLT for second homes and expats remains in place, but there are still 3 months left to take advantage of the buoyant UK housing market and make your purchase with considerable saving.  If you have been considering a new purchase in the UK with an expat mortgage, please get in touch so we can provide you with indicative quotes tailored to your needs.

 

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Great news for Expats with property in the UK

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Property prices rose 1.8% in May to reach a new record average price of £242,832, according to Nationwide.

The building society said prices are up £23,930 over the past 12 months alone, an annual growth rate of 10.9% and the highest recorded in seven years.

The market has seen a complete turnaround over the past twelve months. A year ago, activity collapsed in the wake of the first lockdown with housing transactions falling to a record low of 42,000 in April 2020. But activity surged towards the end of last year and into 2021, reaching a record high of 183,000 in March.

While March’s spike in transactions was driven by the original end date of the stamp duty holiday, a lot of momentum has been maintained. Research indicates that the extension to the stamp duty holiday is not the key factor, though it is clearly impacting the timing of transactions.

Amongst homeowners surveyed at the end of April that were either moving home or considering a move, more than two thirds (68%) said this would have been the case even if the stamp duty holiday had not been extended. It is shifting housing preferences which is continuing to drive activity, with people reassessing their needs in the wake of the pandemic.

The frenzy to snap up a property at the tail end of a pandemic is showing no signs of stopping, with double digit growth in house prices throughout May – the highest we have seen in the best part of a decade.

It is still crucial that prospective buyers go into the process with a sound understanding of the market and what they want from a new property.

As demand in the market increases, the extra competition creates a fear of missing out that can distract buyers from the fundamentals. It’s important not to let the current property frenzy draw attention away from what you are really looking for.

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Expats, looking to lock in longer deals

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Mortgages with five-year fixed rates have undergone a surge in popularity within the expat community, nearly half of the completed deals recently have been for 5 years or more.

Data revealed 49% of expats are now choosing an initial fixed rate period of five years compared to only 25% back in 2015.

Meanwhile, mortgages with rates fixed for two years have experienced a plunge in popularity with 36% of customers choosing the shorter-term fixes compared to more than half in 2015.

Brokers think the fact the Bank of England base rate is currently low, coupled with fears over future rate rises, is main driver behind the soaring popularity of five-year deals, which allow customers to lock into a specified rate for a longer term.

Potential pitfalls of five-year deals

While they provide a certain amount of security, five-year fixes aren’t necessarily for everyone. Indeed, several of those questioned in the survey of 200 mortgage intermediaries raised concerns.

They stressed that products with a longer term initial fixed period might only be suitable for customers who expected to stay in their current home for an extended period. This was because anyone considering a house move might have to pay early redemption penalties which could outweigh the benefits of a longer-term deal.

Low interest rates, economic uncertainty around Brexit, a reduction in home-mover transactions and more re-mortgaging means that five-year products have become a viable option for a much larger proportion of customers.

Outlook

Going forward, the brokers questioned, did not see any reason for five-year fixed rates to fall out of favour.

However, many said a stable economic climate post Brexit, which could lead to an interest rate rise, was the most likely cause of any reduction in the attractiveness of the five-year fix.

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