Calls to reform stamp duty to help first-timers | will never contact you by phone to sell you any financial product. Any calls like this are not from Moneyfacts. Emails sent by will always be from Be Scamsmart.

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Published: 02/03/2017
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We all know how difficult it can be to take that first step on the ladder, and there are calls for more to be done to help would-be buyers do just that, with rising house prices – and resulting stamp duty costs – making it a whole lot harder.

First-time struggles

Research from Clydesdale and Yorkshire Banks shows that many wannabe buyers remain optimistic about their prospects, despite the inherent difficulties: 71% of potential buyers said they were determined to save and buy their own property, rather than consider the option of buying with friends, so a desire to have a home truly of one's own remains strong.

But that's not to say that it'll be easy, particularly with stamp duty costs significantly adding to any buyer's savings goal. House prices continue to rise, with latest figures from Nationwide showing that house prices rose by 4.5% year-on-year in February, and by 0.6% on a monthly basis, putting the price of a typical home at £205,846.

The more house prices rise, the higher a stamp duty bill will be, which means not only do first-time buyers need to build a bigger deposit, they also need to save more for the associated costs. This is prohibiting first-time buyers from getting on the ladder, says Yorkshire Building Society, and as a result, the mutual is calling on the Government to make some changes.

Stamp duty reform necessary

Research from the mutual found that just 26% of first-time buyers bought properties worth less than the stamp duty threshold of £125,000 last year, down from 47% in 2006. This means that 74% of new buyers had to pay the tax – far more than the 53% who had to pay it 10 years ago – and those in high-value areas could have had to pay a particularly hefty bill.

Rising house prices mean that first-timers are finding it increasingly difficult to find properties under the £125,000 mark, yet despite the fact that average house prices have risen by 35% since 2006, the stamp duty threshold has remained unchanged. At that time, it was altered to keep pace with house price inflation, but since then it's fallen by the wayside; as a result, more properties have been brought into the stamp duty threshold. Combine this with the fact that average wages have fallen by 1% in real terms over the same period, and the struggle becomes even more intense.

Yorkshire Building Society is therefore calling for reform, and is urging the Government to make stamp duty a seller's tax. This would eliminate the cost of the tax for first-time buyers as well as helping people move up the ladder, and the savings could be marked: their calculations show that first-time buyers in the UK could save an average of £3,625 if stamp duty was paid by the property seller, while those moving up the ladder could save an average of £4,154.

"In its present form, stamp duty does not suit today's housing market - it pushes up costs for those looking to buy, exacerbating affordability issues in a market where prices have vastly outpaced wage growth," said Andrew McPhillips, chief economist at Yorkshire Building Society.

"Levying the charge against sellers rather than buyers will help to reduce costs for first-time buyers, helping more people to get on the property ladder. It would also help those moving up the property ladder, enabling them to move to a more suitable property and potentially freeing up smaller homes for first-time buyers to purchase."

Changes afoot?

It certainly sounds as though it could be beneficial, but whether or not a change comes to pass – it's hoped that next week's Budget could have some mention of stamp duty, but there's no guarantee – it's vital to do everything you can to make that first step on the ladder as stress-free as possible.

Saving is key, so start by squirrelling away as much as you can to reach your goal. This could be in an easy access or notice account if you want to make regular deposits, or even a regular savings account if you're truly committed to your goal – these tend to offer better rates than easy access alternatives, so could be a great option if you want to properly get into the habit.

Don't forget to take advantage of Government support, too, with a Help to Buy ISA being a great way to build your fund. These accounts allow you to save up to £200 per month (as well as an initial lump sum of up to £1,200), and when it's time to buy your first home, the Government will give you a 25% top-up on the amount saved, up to a maximum bonus of £3,000. For first-time buyers, this could be the best way to make the most of your ISA allowance.

Make sure you know the kind of market you're dealing with to get a better idea of how much you'll need to save. Keep an eye on house prices in your chosen area so you know how big a deposit you'll need, and make sure to factor in stamp duty and additional moving and legal costs. Remember, too, that you can now secure a mortgage with as little as a 5% deposit, so check out the top mortgages for first-time buyers so you know what to aim for. Happy house hunting!


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