Lower Stamp Duty threshold and outdated LISA limits could block thousands from homeownership, report finds
The upcoming Stamp Duty reforms in April will intensify the affordability struggles faced by first-time buyers in the UK, Skipton Group’s latest Home Affordability Index has indicated.
From April 1, the Stamp Duty threshold for first-time buyers in England will drop from £425,000 to £300,000. This change means that purchasing a first home priced at £425,000 will cost buyers an additional £6,250. The proportion of local authority areas (LAs) where average first-time buyer properties incur Stamp Duty is expected to surge from 8.4% to 32% overnight.
The report also highlights growing concerns around the Lifetime ISA (LISA) scheme. Skipton Group forecasts that by 2027, the £450,000 LISA house purchase limit will fall short of average first-time buyer prices in over 10% of British local authorities. As a result, thousands of LISA holders could face being unable to use their savings for a home purchase without incurring the government’s 25% withdrawal penalty.
The Home Affordability Index, now featuring local authority data for 363 areas across Great Britain, also outlines other key findings. Nearly 90% of potential first-time buyers are unable to afford a home in their local area based on their financial situation.
Wales accounts for six of the 10 least affordable areas, while Scotland dominates the most affordable regions. In Aberdeen City — the most affordable LA—three in 10 potential first-time buyers can afford a home. In contrast, in Ceredigion, the least affordable area, just three in 100 can afford to buy.
Four in 10 potential first-time buyers spend more than 45% of their income on essential housing costs. While home affordability has improved slightly since 2020, only 7.8% of households earning below £23,400 can afford to buy a home in their local area. First-time buyers in the most affordable areas are eight times more likely to purchase a home compared to those in the least affordable regions.
Stuart Haire (pictured), chief executive of Skipton Group, emphasised the need for government intervention to prevent worsening conditions for first-time buyers.
“The first step onto the property ladder remains by far the hardest with almost 90% of potential first-time buyers across Great Britain being unable to afford to get on the property ladder without additional help,” said Haire.
“Todayʼs analysis shows that this chronic lack of affordability is about to get even worse. The upcoming Stamp Duty reforms will further hurt first-time buyers and government schemes designed to help more people onto the housing ladder – such as the Lifetime ISA – risk becoming as obsolete as a fax machine if house prices continue to grow.”
Haire urged the government to maintain the current £425,000 stamp duty threshold for first-time buyers and to adjust it annually in line with inflation. He also called for the LISA limit to be raised to at least £500,000 and the withdrawal penalty reduced from 25% to 20% to protect savers’ contributions.
“Across the country, we see first-time buyers doing all they can to be in the best position to afford a home of their own: working hard, saving what they can, and making use of government initiatives designed to help them into their own homes,” Haire said. “Despite these endeavours, monumental barriers stand in their way – barriers that can and should be removed.”
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