This year began with the arrival of Lockdown 3, the rollout of a COVID-19 vaccine, the end of the Trump Presidency in the USA, and the beginning of the post-Brexit era for the UK. Quite a cocktail of events to deal with!

The effect of these events is widespread. However, in relation to the property sector, we must also take into account the end of the Stamp Duty Land Tax (SDLT) holiday on 31st March 2021, potential changes to the present Capital Gains Tax (CGT) regime and the introduction of a 2% SDLT charge from 1st April 2021.

So, what are the implications for the UK property market?

The SDLT holiday is of great interest to those buying property as they will receive a reduction of up to a maximum of £15,000 from their SDLT bill on purchase. However, what should also be considered is the reason for the saving, which was to stimulate the market. This has been achieved, but there is a possibility that property prices will be adversely affected following the reintroduction of SDLT to its previous level. There might be savings in the sum paid for the property, which will negate and possibly exceed the usual cost of SDLT.

It has been predicted that there may be an increase in CGT, possibly up to 40%, in the forthcoming Budget on 3 March 2021. The impact of this increase will potentially be more significant to the property market. It might cause existing buy-to-let (BTL) landlords to re-evaluate their present portfolios, and potential BTL buyers to consider whether or not to enter into this market.

While any SDLT increase usually has a negative, and normally temporary effect, on the level of sales, the introduction of a 2% SDLT cost for overseas buyers in excess of the existing SDLT rates is unlikely to create a further downturn. The cost of the UK’s SDLT will remain largely in line with other comparative countries.

How are mortgage rates being affected by the present turmoil? The answer is that they have been largely unchanged over the past few months. Borrowers have been able to benefit from the lowest 2 year and 5 year fixed rates in living history.

We are seeing a trend towards older borrowers remaining keen to borrow – even if they are in a position to repay outstanding debt. There is a feeling that the returns in other asset classes could be in excess of the cost of lending, and whilst ‘borrowing to invest’ is not a decision which advisers may normally approve of, there is evidence that borrowers are doing just that.

Along with many other sectors, the next few months are likely to be quite lively in the world of mortgages and property. Watch this space!

We strongly advise borrowers to seek professional independent financial advice before making a final decision. Our mortgage team is here to help and can be contacted on 020 7444 4030 or by email.

Andrew Garber
Partner and Head of Mortgages
agarber@partnerswealthmanagement.co.uk
020 7444 4041

 

The above content does not represent a personal recommendation. Your home is at risk of repossession if you do not maintain mortgage payments.