Out with the new, in with the old: The end of the stamp duty holiday

end of the stamp duty holiday

As we step into October, we wave a final farewell to the stamp duty holiday. It’s fair to say it’s been an interesting 15 months. The temporary cut to stamp duty land tax (SDLT) rates, which ended on 30 September 2021, aimed to kickstart the UK’s economic recovery after the initial aftermath of the pandemic. Since its announcement, we’ve witnessed:

  • A rise in property value, as high as an 8% annual increase
  • A flood of new buyers entering the market

There’s been much speculation about what the end of the stamp duty holiday will mean for the property industry. To help conclude, we’ve looked into specific sectors within the market:

Buy-to-let

For buy-to-let (BTL) investors, it might come as a relief. We recently commissioned a survey among more than 500 UK-based property investors. We found that 60% of them felt the stamp duty holiday made the property market “too chaotic”. Indeed, while 38% had purchased another property between July 2020 and September 2021, a further 32% tried but failed to do so.

Despite this, 68% still say they still consider buy-to-let as an appealing investment opportunity. You can download our full survey ‘Buy-to-Let in Focus’ – a report on the post-pandemic buy-to-let market.

There can be no questioning the spurring impact the temporarily reduce SDLT rates had on the market. The UK saw a record of property transactions recorded in June 2021, coming in at 213,120. This became the highest number since October 1988 for a singular month.

Source: Savills

First time buyers

The UK average house prices increased by 8.0% over the year to July 2021. So, whilst you could achieve tax savings of up to £15,000, the average property price rose by £19,000 during the first 12 months of the holiday. With first-time buyers already struggle to save for a deposit – the rise in value may not have worked in everyone’s favour. On the other hand, for those looking to purchase property worth over £300,000 – the holiday did save first-time buyers an extra few thousand on their new property purchase.

Source: Office for National Statistics

Also from this perspective, very few companies involved in the real estate market that would argue against the success of the scheme. In fact, there are some which may have breathed a quiet sigh of relief when the holiday ended. Opening up a period of relative calm after a frenetic 15 months.

The future of lending

Reflecting on the past year, one of the most positive trends has been the increased understanding of alternative finance solutions. Particularly the understanding and use of bridging loans.

As the intensity of the market rising, the need for flexibility and speed became fundamental for property investors. The sudden introduction of hard deadlines saw many buyers looking for new solutions, as mortgage delays became the norm. While some traditional lenders such as high street banks struggled to meet demand, bridging lenders were able to open their doors and introduce bridging products to new clients.

Now, with the stamp duty holiday wrapped up, the question is what bridging lenders can do to maintain the momentum that’s grown over the past year. Here at MFS, we’ve noted two key actions that lenders should be aware of:

1) Education

Although awareness of bridging finance has improved remarkably over the past decade, there remain large numbers of brokers and property buyers who do not fully understand:

  • What bridging finance is
  • How short-term loans work
  • The situations in which bridging finance are best utilised

Lenders must engage the market with informative content, rather than focusing too much attention on advertising low rates or broker fees – these will mean nothing if education is not prioritised.

2) Transparency

MFS has seen the bridging market expand significantly since its foundation in 2006. It’s become increasingly competitive, as new lenders join and witnessed new products enter the market. Overall, this has been a positive development. We’ve been able to provide borrowers with more choice and encourage innovation.

One risk of a more crowded market is that questionable marketing tactics begin to creep in. With lenders promoting lower and lower rates, which do not materialise once clients engage with them. This is already a prominent trend – some rates look too good to be true, and often, that is the case.

15 years of MFS

To these ends, we have certainly had to act fast to ensure we met the increase in enquiries. We pride ourselves on speed and high-quality service, so we worked on meeting demand whilst delivering these same standards.  To do so, we:

We’ve delivered our highest number of bridging loans in the first nine months of 2021 than it has at any other point in its 15-year history. What we hope is that those who turned to bridging finance during the stamp duty holiday will have had their eyes opened to the role it can play. A bridge loan can help facilitating transactions at pace, even when other lenders are failing to come through.

If you’re interested in learning more about bridging loans and how they work, check out our what is a bridging loan page.

bridging loan for auction properties

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