Bigger stamp duty bills for some home buyers as discounts shrink

Stamp duty discounts have shrunk, adding thousands of pounds to the costs paid by some home buyers.

The “nil rate” threshold for first-time buyers has reduced from £425,000 to £300,000 from Tuesday, and for home movers, the zero rate threshold has halved from £250,000 to £125,000. Stamp duty applies in England and Northern Ireland.

Bank of England figures released on Monday showed that the number of mortgage approvals made to home buyers – which are an indication of future lending – fell ahead of the stamp duty deadline.

Some 65,500 mortgage approvals for house purchases were recorded in February, which was around 600 lower than in January, the Bank’s Money and Credit report said. It was the lowest monthly figure recorded since August 2024.

Richard Donnell, executive director at property website Zoopla, said: “Mortgage approvals have slowed in the wake of the rush to beat the stamp duty deadline and are now recovering after the seasonal slowdown over December.

“We expect approvals to continue recovering towards 80,000 a month as the market returns to normal. Zoopla’s latest data shows that sales agreed are up 5% over the last year with more sales agreed driving continued demand for mortgages to fund sales.”

Mr Donnell has previously suggested that home buyers will expect to reflect extra stamp duty costs in their offers, typically looking to “split” the cost with the seller.

In February, Zoopla calculated that the proportion of first-time buyers in England and Northern Ireland who will need to pay stamp duty will double from April.

The firm estimated the share of first-time buyers paying the tax will jump from 21% to 42%.

The proportion of existing homeowners buying a new home as their main residence who will be liable to pay stamp duty will increase from 49% to 83%, according to Zoopla.

HM Revenue and Customs (HMRC) figures released last week showed a surge in sales going through as buyers rushed to beat the deadline.

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An estimated 108,250 home sales took place in February – 28% higher than February 2024 and 13% higher than January 2025.

Credit information company Experian has also released data showing the number of mortgage applications in the final quarter of 2024 jumped by nearly a third (32%) compared with the same period in 2023.

John Webb, a consumer affairs expert at Experian UK and Ireland, said: “Our data suggests that consumers have been quite resilient, with a significant increase in mortgage applications in the last quarter of 2024 compared to the same period in 2023.

“However, rising house prices in some areas of the country have forced first-time buyers to look further afield to get on to the property ladder.”

Rightmove previously estimated that more than 25,000 first-time buyers in England would miss the stamp duty deadline at the end of March, completing their transaction instead in April.

The website also estimated that nearly 74,000 home movers in England would just miss the deadline and complete in April.

Calculations by Rightmove show first-time buyers in London who are looking to escape stamp duty charges could be particularly affected by the change in the stamp duty thresholds.

The website estimates that less than one in 10 (9%) homes on the market in the capital are priced under the new £300,000 nil rate threshold, compared with 27% which were under the previous £425,000 threshold.

By comparison, in the North East of England, nearly three-quarters (74%) of homes for sale remain under the threshold from Tuesday, down from 87% previously, Rightmove estimated.

There may be some consolation for buyers who have missed the stamp duty deadline, with some lenders launching mortgage deals with cash sweeteners.

Yorkshire Building Society has unveiled a new mortgage range, offering first-time buyers up to £6,250 cashback.

The society’s director of mortgages, Ben Merritt, said the move “is designed to help cushion that blow (of the stamp duty changes) for the majority of aspiring homeowners”.

Nottingham Building Society has new mortgages offering up to £5,000 cashback.

Skipton Building Society has also launched a new cashback range.

Santander UK said on Friday that it had eased its mortgage affordability rules in response to a call from the Financial Conduct Authority (FCA) for lenders to design their rates to best meet customers’ needs.

Some customers will be able to borrow between £10,000 and £35,000 more than previously, the bank said, depending on individual circumstances and subject to affordability checks and loan-to-income limits.

Matt Smith, Rightmove’s mortgage expert said: “Average mortgage rates have remained steady since last week’s spring budget and unexpected drop in inflation rate.”

He added: “The short-term outlook for rates remains much improved compared with last year. However, the markets are currently less certain about a second (Bank of England base rate) cut of the year in May, which may get pushed to June. Once a cut does happen, it could help to push forward further mortgage rate cuts from lenders.”

Chantelle Elmi, a financial planner at Octopus Money, said: “While today’s stamp duty changes are another setback for first-time buyers, they provide an impetus for younger generations to take charge of their financial future.”

Nicholas Mendes​​​, mortgage technical manager at broker John Charcol said: “If you’re coming to the end of your current fixed-rate deal, now’s a great time to start exploring your options. Lenders are sharpening their rates, particularly in the remortgage space, so shopping around could lead to a better deal than you might expect.”