The UK mortgage market is undergoing significant change. Shifts in regulations, increased taxes, and loosened mortgage rules have combined to create an interesting yet somewhat complex future for the industry.
Whether you are a first-time buyer, home mover, or landlord, the ever-changing landscape is making it easier for some and harder for others to acquire property in the UK. However, opportunities will always arise amid the uncertainty.
Impact of Stamp Duty Threshold Reduction
Following Chancellor of the Exchequer Rachel Reeves’ announcement in October 2024 to lower the threshold for Stamp Duty Land Tax on property purchases, there has been an expected surge in buyers rushing to get on the property ladder or purchase a new home before the March 31, 2025, deadline. The new thresholds take effect today.
Rachel Reeves – Chancellor of the Exchequer Image source: UK Government Open Licence
New Stamp Duty Charges
For first-time buyers, the 0% stamp duty threshold has been reduced from £450,000 to £300,000, while for home movers, it has dropped from £250,000 to £125,000.
First-time buyers: 5% on any amount over £300,000.
Home movers: 2% on any amount over £125,000 and 5% on any amount over £250,000.
For the full list of stamp duty rates, visit the Gov.uk website
What Opportunities Are There?
In light of the stamp duty changes, some lenders have introduced measures to help first-time buyers manage the increased costs.
Accord Mortgages, a subsidiary of Yorkshire Building Society, is now offering cashback incentives to first-time buyers, helping to cover stamp duty costs. The cashback ranges from £2,500 to £6,250, depending on the property’s value.
Yorkshire Building Society – Parent company of Accord Mortgages Image Source: YBS.CO.UK
Mortgage Lending Growth Forecast
Following the Chancellor’s announcement of a stamp duty increase, she has also urged regulators to “tear down regulatory barriers” to promote economic growth.
With interest rates falling and a push for relaxed regulations, mortgage approvals are expected to rise. As a result, UK mortgage lending is forecast to double in 2025, increasing from 1.5% to 3.1% by 2026.
House Prices: How Will They Be Affected?
The influx of buyers before the stamp duty increase has led to a surge in house prices throughout 2025, with experts predicting increases between 2.5% and 4%. However, a slower pace of growth is expected in 2026.
Review
As of April 1, 2025, significant changes in stamp duty regulations have reshaped the UK housing market. The reduction in stamp duty thresholds has led to an increased number of homebuyers subject to higher taxes, with 83% now paying more compared to 49% previously. This surge in demand before the policy change resulted in a 3.9% year-on-year rise in house prices by March, bringing the average price to £271,316.
For prospective homebuyers, it’s crucial to stay informed about ongoing policy changes and their potential impact on purchasing costs and market dynamics.
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