How to save your house sale from the stamp duty cliff edge

The stamp duty holiday’s days are numbered. Chancellor Rishi Sunak is said to have ruled out an extension to the tax break that ignited the housing market in the pandemic and saved buyers more than £3 billion.

And as the clock now ticks towards the deadline on March 31, movers are being urged to put a back-up plan in place to save their sale.

The Government removed the stamp duty charge on homes worth up to £500,000 in England and £250,000 in Scotland and Wales to save buyers up to £15,000.

Precarious position: Rishi Sunak is said to have ruled out an extension to the Stamp Duty holiday that ignited the housing market in the pandemic and saved buyers more than £3bn

With little over nine weeks left to take advantage, hundreds of thousands of deals are caught in a log-jam as buyers rush to complete a deal.

There are currently more than 613,000 homes waiting to change hands, according to Rightmove.

But some local authority searches in England and Wales are now taking between ten and 12 weeks, even though the Government’s target is just two weeks. Busy conveyancers are also having to turn away customers.

As a result, property data firm TwentyCi forecasts more than 300,000 households will miss the deadline.

Rob Houghton, chief executive of moving services firm Reallymoving, says: ‘There will be a significant glut of buyers trying to beat the deadline.

‘I’d urge them to prepare now for the possibility they may not complete their move in time and to start talking to their seller, who will be equally worried about their sale falling through.’

PREPARE FOR WORST

Anticipating paying a stamp duty bill is the surest way to guarantee your home purchase will not be derailed.

If you do not have enough cash in your rainy-day fund to foot the bill, now is the time to plan the release of money from savings accounts with restricted access or even investments.

Borrowers who do not have enough savings may be able to get a bigger mortgage and use cash earmarked for their house deposit.

Around 55 per cent of property sales are usually linked to a chain of other buyers and sellers

Around 55 per cent of property sales are usually linked to a chain of other buyers and sellers

For example, if you are buying a property for £500,000 and planned to arrange a 70 per cent mortgage, your loan is £350,000 and your deposit is £150,000.

By increasing your mortgage to £365,000 you free £15,000 of your deposit in case you need to pay the bill. You would now have a 73 per cent mortgage.

You would need to pass the bank’s affordability checks to be approved for a higher loan amount and you could be offered a slightly higher interest rate. 

If you do complete your purchase in time to benefit from the stamp duty saving, you could use the spare £15,000 to reduce your mortgage balance.

David Hollingworth, of broker L&C mortgages, says: ‘You shouldn’t need to start the application from scratch, but your bank will need to reassess your application to make sure it is affordable.

‘That means you could go back into the bank’s mortgage admin queue, so it won’t necessarily be an instant fix and you could suffer further delay.’

BREAK THE CHAIN

Around 55 per cent of property sales are usually linked to a chain of other buyers and sellers.

Everyone in the chain must be ready to exchange contracts before all the deals can be completed. It means you could miss the stamp duty deadline thanks to an issue farther up or down the chain.

To mitigate this risk, you could consider a move into temporary accommodation — to disconnect from the properties in the chain below you.

It also means you are selling at the peak of the market because experts predict that house prices will begin to fall when the stamp duty deadline passes.

Analysis from TwentyCi suggests that chain sales had fallen to 45 per cent in December and could fall farther still.

BRIDGE THE GAP

An alternative way of breaking the chain is by taking out a so-called bridging loan.

If there is a problem preventing you from selling your home, caused by someone else farther down the chain, you can use a bridging loan to buy your new home before your old one is sold.

Bridging loans can be expensive and are only intended for short-term use. You can expect to pay an arrangement fee of around 1 per cent of the loan and a monthly interest rate of around 1 per cent.

Speak to a specialist broker to find out whether the cost of using a bridging loan outweighs the cost of paying stamp duty.

Logjam: There are currently more than 613,000 homes waiting to change hands according to Rightmove

Logjam: There are currently more than 613,000 homes waiting to change hands according to Rightmove

STRIKING A DEAL

Sellers may also be concerned that their buyer will pull out or lower their offer if they cannot beat the deadline.

Simon Gerrard, managing director of North London estate agent Martyn Gerrard, says: ‘It’s likely that we will see buyers come back to negotiate on price. For sellers, this will be disruptive and could not only cause delays but have repercussions throughout the chain.’

Another tactic sellers will be fearful of is gazundering, where the buyer lowers their offer just before the exchange of contracts. This means you must either accept the offer or walk away.

To reduce the chances of this happening, open price negotiations early if it is possible that the sale will happen after the March 31 stamp duty deadline.

This will also give you the time you need to negotiate the price of your onward purchase.

If you are not desperate to sell, you are in a strong position to hold your ground.

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