Government urged to consider reforming the charges
Those struggling to get on to the property ladder, might have wished that the April 1 changes to Stamp Duty were an ill-judged April Fool’s Day prank, but sure enough they have come into force, and are already making an impact on the mortgage market. The threshold for first-time buyers in England has dropped from £425,000 to £300,000. Home movers have seen their zero rate threshold halve from £250,000 to £125,000.
Even before the changes came in, of course, they were influencing customer behaviour, with some homebuyers trying to push through house sales before the deadline to save on rising Stamp Duty costs. Others were holding off from seeking mortgage deals in the first few months of this year, once they realised that purchases wouldn’t be completed in time.
Some hoped there be a reprieve, according to Rachel Geddes (pictured left), strategic lender relationship director at brokerage Mortgage Advice Bureau. “Many customers were waiting to see what happened with Stamp Duty in the hope for a deadline extension to be put on the table, which explains why we’re slightly down in terms of mortgage activity so far this year,” Geddes told Mortgage Introducer. “However, we’re significantly up in terms of lending volumes, which demonstrates that the appetite for buying is still very much alive. Conveyancers have been under considerable pressure to help homebuyers get over the line before the Stamp Duty changes came into place, which is why we’re experiencing a delay in activity trickling through.”
She added: “Nevertheless, based on what’s in front of us, when we look at Q1 business in 2025 versus Q4 2024, we’ve experienced a substantial increase - and this is purely down to the fact that there’s more activity and positivity in the market as the economy begins to stabilise.”
Some 41% of prospective buyers have told Mortgage Advice Bureau, it says, that the latest Stamp Duty changes may prevent them from purchasing a property in the next 12 months. It believes a relaxing of lending rules could help them. “There’s a growing appetite among most lenders to relax their regulations, with some having already taken action in adjusting their affordability criteria, and others looking at how they can implement this moving forward,” Geddes noted. “The FCA has openly criticised lenders for being ‘too cautious’ when approving mortgages for first-time buyers, and this should empower more lenders to follow suit. While lenders need to take a pragmatic, sensible approach to relaxing their rules, the time for action is now.”
Geddes suggests that Stamp Duty reform is needed. For example, Mortgage Advice Bureau believes that the government could offer a Stamp Duty refund to those who buy and retrofit to an EPC rating of C or above.
“An open conversation is needed between the Government, building federations and regulators to provide additional support for homebuyers managing Stamp Duty costs, and in turn to meet the 1.5m new homes target,” she said. “However, without a plan and concrete activity as to how this will be achieved, all we have is a pledge and no real sense of direction. Supporting renters to get on the property ladder via lender and government support is also crucial. Lenders are beginning to offer their own initiatives and solutions to support customers in this space through incentives such as Stamp Duty cashback, which is fantastic to see.”
Read more: Mortgage market shows signs of warming up
Stamp duty increases put the squeeze on landlords
Tanya Elmaz (pictured centre), director of intermediary sales at specialist lender Together, points to the impact on the buy-to-let sector. “The market is undergoing a significant shift due to the Stamp Duty increases, with many amateur landlords selling up and exiting the sector altogether,” Elmaz said. “However, it has also created opportunities for professional investors who are expanding their portfolios by acquiring properties from smaller landlords. While the tax burden is increasing, strategic landlords are finding ways to adapt - whether by diversifying into different property types like semi-commercial, HMOs, student accommodation, or social housing, or by shifting their focus to regions with higher yields such as Manchester, Liverpool, and Birmingham. The buy-to-let sector remains resilient, but landlords must be more strategic in their investments to maintain profitability.”
While there may be a temporary slowdown in market activity following the Stamp Duty changes, it is expected to pick up again in the coming months as landlords adjust their strategies, Elmaz observes. “The ongoing demand for rental housing, particularly in student accommodation and social housing, will drive continued investment,” she reasoned. “As investors find ways to mitigate costs, market activity should regain momentum in the latter half of the year.”
Elmaz also favours a government rethink on Stamp Duty. “The Government should reconsider the recent increase in Stamp Duty on additional properties, particularly in light of concerns from landlords that the increased cost burden means they can no longer make their investment work for them,” she said. “Many landlords are already feeling the financial strain from tax changes and regulatory requirements, and this additional cost could exacerbate the issue. Ideally, Stamp Duty on second homes and buy-to-let properties should either be reduced or reformed to strike a better balance between generating revenue and maintaining a stable rental market.”
She added: “Given that nearly a quarter of landlords have explicitly called for reform, it would have been prudent for Rachel Reeves to address this in her Spring Statement. Instead, by avoiding any mention of further changes, uncertainty remains, and landlords worry that even higher rates could be introduced in the future. The government appears to be somewhat out of touch with the financial and operational pressures landlords are facing.”
Meanwhile, Aaron Milburn (pictured right), UK managing director at Pepper Advantage commented: “What we are seeing now is that sustained economic pressure in certain parts of the market is building to a point where mortgage payments, which are usually the most protected, are being hit. While the environment is challenging, the lenders we work with, especially in the specialist markets, have had a good start to the year. The push to beat the Stamp Duty changes contributed to demand, and one thing to keep an eye on in April is lower completions now that the changes are in place.
“House prices may have to adjust to counter the changes in Stamp Duty, but overall demand for property remains high. Some of this demand is due to the exit of more landlords from the buy-to-let space, which puts pressure on rent, as well as the chronic lack of supply in the UK market. We are seeing good pipeline from our clients.”
