"At the very least the government should be thinking about making the current changes to first-time buyer stamp duty charges permanent, with the higher thresholds introduced in 2022 due to expire next year"
- Tim Bannister - Rightmove
Rightmove has highlighted the disproportionate effect of stamp duty in some regions of England compared with others, due to every area having the same zero tax charge for homes up to £250,000 for all movers, and £425,000 for first-time buyers.
In London, only 4% of homes for sale are exempt from the current stamp duty charges for all buyers, compared to 71% in the North East. Meanwhile, less than a third of properties for sale in London are currently exempt from stamp duty for first-time buyers, compared with nine in ten homes in the North East.
Rightmove suggests a more localised approach to stamp duty charges in line with regional property prices could support more first-time buyers in getting a foot on the ladder, but also potentially encourage more movement up and down the ladder.
Tim Bannister, Rightmove’s property expert said: “Stamp duty is a big barrier to moving, with some who would potentially consider a move likely put off by the hefty stamp duty tax in addition to other moving costs. At the very least the government should be thinking about making the current changes to first-time buyer stamp duty charges permanent, with the higher thresholds introduced in 2022 due to expire next year.
"However, we think there is an opportunity to go a step further. With such regional variations in property prices, increasing stamp duty thresholds in line with these regional variations would seem a logical first step for stamp duty reform. Whilst longer-term supply measures are also needed, this could be one way to help first-time buyers trying to get onto the ladder in more expensive parts of England.”
More innovation in the mortgage market
One rumour ahead of the Spring Budget is a 99% mortgage scheme, which would only require buyers to put down a 1% deposit.
However, data from the FCA and Bank of England highlights that only around 5% of mortgages currently taken out are at 95% or higher Loan-to-Value, with the majority saving up a larger deposit to benefit from a lower mortgage rate.
Whilst innovations in this space are welcome, Rightmove suggests any new scheme will need to go further and support a larger group of future first-time buyers than a 99% mortgage scheme is likely to.
Matt Smith, Rightmove’s mortgage expert said: “It’s been good to see innovation in the mortgage product space over the last couple of years, both from traditional lenders and more recently from new entrants. These new products have the good intention of helping renters who want to buy through supporting those with smaller deposits, or enhancing the amount a first-time buyer can borrow through access to longer-term fixed rates – removing the stress test.
“Each of these new innovations is working to ensure that lenders balance the need to be prudent and comply with complex regulations that govern their affordability criteria, whilst also increasing access to homeownership to more people.
“The proposal for a 99% mortgage product will offer further support for those with smaller deposits, but it doesn’t address the issue of being able to pass an affordability stress test at 8%+ whilst also being inside the 4.5 loan to income ratio.
“Whilst we support new solutions to help more first-time buyers, the 99% LTV mortgage alone is only likely to support a relatively small group. More needs to be done to strike the right balance between supporting a bigger group of future first-time buyers, whilst maintaining robust affordability assessments.”
Green home incentives
Following the government backtracking on some energy efficiency targets last year, Rightmove insight shows a decline in the number of landlords planning to make energy efficiency upgrades to properties with lower EPC ratings. In 2022, over a third (36%) of landlords said they planned to make improvements to properties rated below a C. In late 2023, after the government had announced they were scrapping targets, this dropped to 26%.
To help encourage more landlords to make improvements and not sell their properties, more incentives such as bigger, more widely accessible grants or tax savings should be considered to help make rental homes greener for tenants.
Christian Balshen, Rightmove’s lettings expert said: “Due to the lack of available and accessible funding, many landlords aren’t in a financial position to be able to carry out major energy efficiency upgrades to their properties. A further lack of clarity around potential future Energy Performance Certificate regulations means we’ve seen a drop in the number of landlords who are actively deciding to make their properties greener.
"Ultimately this will be to the detriment of tenants who are increasingly wanting to live in energy efficient properties, and so we’d encourage any financial incentives that can be provided to landlords to improve the energy efficiency of the UK private rented sector.”
