There could be an upswing in mortgage applications soon with buyers seeking to make the most of the base rate staying the same and the positive change in the stamp duty rules.
Purchasers now have a new system of stamp duty to consider when they`re buying their home. Previously, you`d have to pay one per cent of the value of the property if it was worth between £125,000 and £250,000, but three per cent if it was between £250,000 and £500,000.
Now though, there`s a sliding stamp duty property tax scale based on a starting threshold of £125,000. So if you buy a £150,000 house, you`ll only pay two per cent stamp duty on the £25,000 above the £125,000 threshold. That means now you`ll pay £500 in stamp duty, whereas previously it was £1,500.
On a related front the base rate, the Bank of England has decided to keep the cost of lending at 0.5 per cent, which will keep variable mortgages at a similar level and mean that people looking for fixed deals can look to still get one that has a relatively low interest rate.
Throughout the year, there had been talk that the UK`s central lender would put up the base rate before 2015, but the economy appears to have been recovering just fine as it is, so they`ve decided against doing so. When it does happen, it`ll is likely to be by small amounts each time, so hopefully it doesn`t cause too much of a headache for homeowners.
If the idea of paying less in stamp duty is making you think about buying a house or moving home, we may be able to help. Find out more at firstchoicefinance.co.uk.
The Chancellor`s Autumn Statement suggested that as many as 98 per cent of homebuyers would benefit from the change in the rules, which were widely regarded as being unfair; paying just one penny over the threshold for a home buy would result in you paying thousands more in stamp duty.
As a result, some people may have chosen to add their stamp duty payment onto their mortgage, but this could be an expensive business. With the interest payments over many years that you have on a home loan deal, the extra few thousand pounds would have been a lot more expensive in the long run.
The additional money could also affect your loan to value ratio, which may mean that you would have had to choose a different, potentially more expensive product. Now that stamp duty is generally going to be much lower, more people are likely to be able to pay it upfront and those that do still add it to their mortgage won`t suffer as much long term pain.
This isn`t the last change that some of us are going to see relating to stamp duty over the next few months. At the start of April, Scotland is replacing it with the Land and Buildings Transaction Tax, which is similar to the new stamp duty model, but with different thresholds.
At First Choice Finance, we always look to find the most suitable deal for your circumstances, so if you give us a few details we can use our position as a mortgage intermediary with in house advisers to review our lenders in order to sort the wheat from the chaff.
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