They could face higher overall costs, says adviser
Buyers waiting for mortgage affordability to improve may end up paying more due to rising house prices and higher upfront costs, according to new research from mortgage adviser Alexander Hall.
The analysis suggests that even if mortgage rates decline, the additional expenses of a larger deposit and increased Stamp Duty could outweigh potential savings.
From April 1, Stamp Duty on a typical home in England priced at £268,087 will increase from £904 to around £3,404 as the government’s current tax relief thresholds expire. This has prompted some buyers to act quickly to complete transactions before the deadline.
While those unable to buy before April will miss out on the lower stamp duty rates, property website Rightmove has noted that they may still benefit from a greater supply of homes on the market. Some buyers are also considering waiting for possible interest rate cuts later in the year, which could improve mortgage affordability.
Average mortgage rates are expected to fall from 4.27% to 3.63% by the end of 2024. If this happens, a typical buyer’s monthly mortgage payment could decrease from £1,164 to £1,127, saving around £900 over a two-year fixed term.
However, property prices are forecast to rise by 3.5%, pushing the average home price to £277,470. This would increase the amount buyers need for a deposit and result in higher stamp duty costs.
A buyer purchasing now would need a £53,617 deposit, with Stamp Duty costs increasing to £3,404 from April. If they wait until the end of the year, the required deposit could rise by £1,877, and Stamp Duty may increase by another £469. The total additional upfront costs of £2,346 would surpass the estimated £900 saved in mortgage repayments over two years.
“While we’re still a few weeks away from the Stamp Duty deadline, the reality is that unless you’re nearing the end of your purchase, you’re unlikely to complete before April 1st and this means you’ll need to pay a higher rate of Stamp Duty,” said Stephanie Daley (pictured), director of partnerships at mortgage advisor Alexander Hall. “It’s a considerable jump, with the average homebuyer in England set to pay £2,500 more.
“It’s understandable that with interest rates expected to fall further this year, some buyers may choose to sit tight in anticipation of improving mortgage affordability. However, doing so could well cost you more, as 2025 is forecasted to be a far more buoyant year for the housing market.
“With house prices likely to climb, you may well find that choosing to wait it out could see you pay more for both a mortgage deposit and in stamp duty, versus the savings you’re set to make on your mortgage repayments.
“The good news is that many lenders are already reducing their rates due to the greater degree of market positivity that has materialised so far this year and, by acting now, you can not only secure a more favourable rate, but you can also avoid any future increases to purchasing related costs.”
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