Cutting tax for 'last-time movers' could address housing crisis, says lender
The housing debate in the UK is often squarely focused on young people – the first-time buyers, either renting or still living at home with their parents, into their 20s and 30s, and struggling to get a foothold on the property ladder.
The part that older people play in the housing crisis is seldom addressed – but Family Building Society believes exempting older homeowners, seeking to downsize, from having to pay Stamp Duty, could make a real difference.
The lender believes that if the government adopted the concession for what it calls ‘last-time movers’, the initiative could increase the availability of large properties for families.
It has also urged greater alignment in the approach of key stakeholders, both at central and local government level.
“Increasing housing supply and solving the housing crisis is a long term project,” said Alistair Nimmo (pictured left) the building society’s director of marketing.
“It’s encouraging that the new government is focusing on housing supply and affordability issues, including planning reform, but we’d also like to see Stamp Duty exempted for last time movers, to allow larger family homes to become available for growing families, for example.”
He acknowledged: “Solving the housing crises won’t be easy but a first step would be to have joined-up thinking both between relevant departments of government and between national and local government, planners and developers.”
First-time buyers who purchase a main residential property up to the value of £425,000 do not currently pay stamp duty. If they are fortunate enough to be able to afford a property valued up to £625,000, they won’t pay stamp duty on the first £425,000.
Family Building Society favours a stamp duty exemption for seniors over reviving the Help to Buy scheme, which some industry professionals consider the government should bring back. It believes such a move could work against, rather than for, many first-time buyers.
“Without tackling the fundamental issues that have caused the housing crisis, we don’t believe that a return to a Help to Buy scheme will do anything but stimulate demand and push prices further out of reach for all but a few first-time buyers,” Nimmo said.
Is there a revival in the property market?
The lender’s latest survey of intermediaries suggests a revival in the property market, accompanied by an increase in house purchase mortgage applications, since the recent Bank of England base rate cut.
Of those surveyed in September, nearly two thirds (64%) reported an increase in mortgage enquiries and there is a 56% increase from those wanting to move. Three quarters of the intermediaries questioned said clients were looking at five-year rather than two-year fixed mortgages.
Young people are still keen to get on the housing ladder, with advisers reporting an increase in enquiries from clients about how the so-called Bank of Mum and Dad (and other family members) can help them.
Family Building Society’s head of intermediary sales, Darren Deacon (pictured right) cautioned, though, that while sentiment appears to have improved, there may be some stumbles ahead.
“The market is on the road to recovery but there are also concerns that could affect the future housing market,” Deacon noted. “For example, I do not believe that inflation has been fully tamed and cuts to the base rate are not a given in the short term.
“UK Finance has stated that over the last couple of years Product Transfers have been highest income steam for brokers but now with rates falling in the market and better affordability, as the cost of living crisis eases, the re-mortgage market is coming back and brokers are shopping around.”
Read more: Barclays wants to coax older homeowners into downsizing
What is the pattern of mortgage rate changes currently?
The wider market saw some notable fluctuation of rates in the first half of October – with some increasing, some coming down and other rates pulled – with little in the way of a discernible pattern… yet.
Family Building Society monitors the competitive position of its mortgage rates, but does not see the main lenders as its direct competition, Nimmo explained.
“Whilst we don’t aim to compete with the high street providers,” he commented, “we are not immune from significant changes that they make, nor movements in swap rates, such as we have seen - not just in the past week but over the past few months
“As a building society, we can only lend out the money that our savers deposit with us, so pricing strategy has to balance the opposing interests of our savers and borrowers.”
Predicting how the market will perform over the next 12 months is about as easy as predicting winning lottery numbers, observed Nimmo, but he offered a positive note.
“People will still want to move as families grow, jobs change and older borrowers come to the end of interest only mortgages,” he said, “so there will always be demand for flexible specialist lenders like us.”
