Homebuyers struggle: ‘Sellers just add the stamp duty saving to the price’

Young people in the UK are finding properties even further out of reach as tax breaks and easier credit drive up prices

The housing market has defied expectations over the past year, fuelled by people’s desire to move to properties with gardens and space to work from home, and boosted by stamp duty holidays across the UK.

But the frenzy means many would-be buyers have been left behind. For them, despite the launch of a government guarantee scheme for 95% mortgages, owning a home is now further out of reach than ever. We spoke to readers about their frustration.

Jessica, 30, Leeds

Jessica, a senior buyer for an organisation linked to the NHS, is trying to find a home with her partner, who is also a first-time buyer.

She says the stamp duty holiday – which has been extended until 30 June and will then be phased out – is “ruining” their chances. “In north Leeds, prices were inflated anyway, but now sellers are simply adding on the ‘saving’ from stamp duty to the price of a house,” she says. “The market didn’t need a so-called boost … Prices have increased by at least 10%, probably more, in the time this has been in place.

In March the government announced an extension to the stamp duty holiday launched last year for England and Northern Ireland. Until 30 June, the first £500,000 spent on a property will be tax-free. After that, the threshold will drop to £250,000 until 30 September. It will then return to its normal level of £125,000. However, first-time buyers have a separate threshold, set at £300,000, and that will come back into play after June.

“We have been looking for a year, and all these two policies [the stamp duty holiday and 95% mortgages scheme] have done is increased prices and increased demand. It’s so unhelpful,” says Jessica, who asked for her surname to be withheld.

“We have upped our budget twice in the past year but feel that if we can’t get a house soon, we’ll be completely priced out of the market and will have to buy something much smaller, or somewhere we didn’t want to live.

“I also realise we are in a very fortunate position compared to other first-time buyers – I cannot imagine how hard it must be for people in lower-income jobs. I think the future may be bleak for property. Either an almighty crash or, more likely, property will just become more and more unaffordable, like in areas such as Hong Kong, Japan and Singapore, and we are forced to live in very small spaces.”

Submitted photograph of Celia Burton
Celia Burton worries that “this falsely propped-up market will come crashing down soon, leaving new homeowners in negative equity”. Photograph: Handout

Celia, 33, Kent

Celia Burton, an early years educator living in Rochester, says she and her husband were in a position to buy this time last year but couldn’t due to lenders withdrawing their 95% mortgages during the early months of the pandemic.

“We have saved for what feels like forever [and are] both in good jobs but, due to the high cost of high loan-to-value mortgages and the stamp duty holiday pushing up the prices of already unaffordable homes, we are struggling to make home ownership a reality,” she says. She feels the high loan to value mortgages are “incredibly expensive”, and worries that “this falsely propped-up market will come crashing down soon, leaving new homeowners in negative equity”.

She adds: “We are still currently looking but unfortunately the situation remains much the same, so perhaps we will need to wait after all.”

Sophie, 33, Hampshire

Sophie, a solicitor, has been saving for a deposit for the last five years or so. “The extension of the stamp duty holiday is frustrating to me as a first-time buyer, as it strips away the benefit that was previously reserved for first-time buyers and has artificially inflated prices,” she says. The 95% mortgage scheme, while perhaps helpful to some, doesn’t provide her with any assistance, “and will only push up prices further”.

“I want to be prudent and not rush to buy in the current climate, and have duly saved for my deposit as we are all told we should, but I feel the bar just continues to be moved,” says Sophie, who asked for her surname to be withheld. “I am lucky to now be in a position where I can afford to buy without needing to rely on the 95% mortgage scheme, but I feel it would be inadvisable to proceed while the wider relief is still being offered on stamp duty, and while furlough is still in place.”

Jake, 24, Newcastle

Jake Bell, who works in marketing, has been living with his parents and paying board, and has managed to save up during lockdown. But he says 95% mortgages are not enough to help him into home ownership.

“Five per cent deposits only benefit people who are already earning enough to borrow higher amounts on their mortgage,” he says. “They don’t address the core issue behind falling home ownership: low, often stagnating, salaries among young people. Any yearly token salary increase pales in comparison with rocketing house prices.”

On his current salary, he says he could raise a mortgage of £85,000. “Decent flats in my area are around £100,000 if they need work, otherwise they will go for £110,000 to £120,000,” he says. “That extra bit makes it impossible.”

Although in his price range homes are not subject to stamp duty at any time, he says the market has been rising, making the prospect of owning more distant. “Realistically, despite being good with money and having saved a good deposit, I am reliant on coupling up, or a significant salary increase, to buy a decent flat,” he says. “I’m not expecting to waltz into a three-bedroom house – just a little flat.”


Rupert Jones and Hilary Osborne

The GuardianTramp

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