The rush to beat the SDLT deadline triggered a sharp incline in mortgage debt, with the latest Bank of England money and credit statistics revealing a £9.7 billion increase in March.
Net mortgage approvals for house purchases, an indicator of future borrowing, decreased for the third consecutive month, with a fall of 800 to 64,300 in March. By contrast, approvals for remortgaging increased by 1,000 to 33,400 in March, following a decrease of 700 in February.
Finance experts have warned the end of the SDLT threshold increase could signal bad news for the market, particularly first time buyers who lost out on the significantly more generous threshold.
Rosie Hooper, chartered financial planner at Quilter Cheviot, explained:
“Prospective buyers who were unable to get a sale across the line before the end of March may well either reconsider their plans to move entirely or will need to continue building their savings pot to cover the higher tax bill. This will be particularly burdensome for first time buyers, especially if they are looking to buy a home in a higher value area.
“For example, a first-time buyer purchasing a £500,000 property will now need to cough up £10,000 to cover their stamp duty bill, compared with £3,750 under the previous rules. This rule change has added a considerable affordability hurdle at a time when many buyers, particularly those looking to take their first step onto the ladder, are already stretched.”
The annual growth rate for net mortgage lending rose from 1.9% to 2.7% in March, the highest since March 2023, which was also 2.7%. Gross lending increased significantly to £39.9 billion in March, from £24.9 billion in February, and was the highest since June 2021 (£42.4 billion). Gross repayments also increased in March, to £23.7 billion from £19.8 billion, the highest level of repayments since October 2022 (£25.9 billion).
With affordability remaining a key issue for buyers, the focus of property and finance experts is tuned into mortgage rates and the approach of lenders to what many believe is strict eligibility criteria that needs to be relaxed.
Nathan Emerson, CEO of Propertymark, said of the data:
“As the global economy continues to react to different events, many people are acutely aware there could be challenges ahead regarding overall affordability when approaching the buying and selling process. We are starting to see more competitive mortgage deals from certain key lenders, but the eligibility criteria in some cases remains tight.
“It remains vital inflation stays on a pathway that keeps it as close to the Bank of England’s initial target of 2 per cent as possible. Although there are hints that we may witness various base rate cuts as the year progresses from international bodies, it remains prevalent to consider such cuts will only happen when conditions permit.”
Hooper agreed that a reduction in mortgage rates is necessary to bring buyers to a potentially ‘stagnant’ market.
She concluded:
“Today’s figures show that while the housing market picked up dramatically in March, we are likely to see a significant drop off in the coming months due to the stamp duty changes. Borrowers already face affordability pressures, and many will now need to find several thousand pounds more to pay their stamp duty bills. For the market to start to gather pace again we will need to see mortgage rates decline significantly, which in turn would entice more people to market.
“Unless this happens, 2025 might be a relatively stagnant year for house prices.”
