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Half of house sales agreed now will miss stamp duty discount deadline

Half of house sales agreed now will miss stamp duty discount deadline

AROUND half of property sales agreed now are likely to miss the stamp duty holiday deadline, an industry expert has warned. Coronavirus lockdown measu

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AROUND half of property sales agreed now are likely to miss the stamp duty holiday deadline, an industry expert has warned.

Coronavirus lockdown measures and pent up demand for houses has caused the time it takes to buy a property to double, according to data from online mortgage broker Trussle.

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On average, it takes around 116 days from when a mortgage application is submitted for it actually to go through.

The broker warns that if buyers want to take advantage of the Chancellor’s stamp duty holiday, which ends on March 31 2021, they will have to apply for a mortgage by December 6 at the latest.

But the research shows that it can take even longer in some regions in the UK – up to 166 days in the East Midlands and 157 days in the East of England.

In order to cash in on the stamp duty discount, property buyers in these areas would have had to submit a mortgage application on October 16 and October 26 respectively.

What is stamp duty?

STAMP duty land tax (SDLT) is a lump sum payment anyone buying a property or piece of land over a certain price has to pay.

Up until July 8, most house-buyers in England and Northern Ireland had to pay stamp duty on properties over £125,000.

This was temporarily increased to £500,000 until March 31, 2021 in the government’s mini-Budget in July 2020.

The rate a buyer has to fork out varies depending on the price and type of property.

Rates are different depending on whether it is residential, a second home or buy-to-let, or whether you’re a first-time buyer.

The usual system in England for residential properties means:

  • First-time buyers pay nothing on properties below £300,000 (and relief available on properties of up to £500,000)
  • You pay nothing if the property costs below £125,000
  • You pay 2% if it is worth between £125,001 and £250,000
  • You pay 5% if between £250,001 and up to £925,000
  • You pay 10% if it is between £925,001 and £1.5million
  • You pay 12% on anything over £1.5million

For second homes or buy to let properties:

  • 3% on purchases up to 125,000
  • 5% on purchases between £125,001 and £250,000
  • 8% on purchases above £250,001 and £925,000
  • 13% on purchases above £925,001 and £1.5 million
  • 15% on purchases above £1.5 million

Stamp duty rates are different in Scotland and Wales.

Miles Robinson, head of mortgages at the brokers, said: “A surge in demand has created a bottleneck of transactions and it’s likely that around half of sales agreed after October 22 won’t be completed in time to make the stamp duty holiday deadline.”

The stamp duty holiday means that buyers won’t have to pay any land tax on the first £500,000 of their property.

To qualify, buyers must have completed before the end of March next year, not just in the process of buying a place.

Outside of the break, home buyers do not pay stamp duty on the first £125,000 of homes, after which the rate increases.

The value of the property that’s worth between £125,001 and £250,000 is charged at 2%, and 5% above this up to £925,000.

First-time buyers are already exempt from paying the tax on the first £300,000.

The discount is expected to save buyers more than £5,000 on average, according to MoneySuperMarket.

The comparison site estimates two thirds of buyers are only in the market now because of the stamp duty holiday, with 24% saying they would withdraw if they miss out on the savings.

Its research estimates that it takes around 123 days to purchase a property in the current climate, meaning you’ll need to start the process by November 29 to benefit from the tax break.

Mr Robinson added: “We must also advise that those looking to buy a new home should make sure they budget enough to pay the stamp duty land tax just in case the purchase does not complete before the deadline.

“If a buyer were to pull out after they’ve already exchanged, sellers may be in a position to sue for consequential loss at this point, and buyers may lose their deposits.

“This is going to cause a lot of stress and uncertainty for customers over the coming months, and we’re urging all buyers to take the necessary preparations.”

The housing market is allowed to stay open during England’s second coronavirus lockdown, as long as everyone follows the Covid secure rules.

Estate and letting agents can continue to operate throughout November and house viewings can also continue.

Getting help from a removal firm is still permitted too, while visiting show homes and developer sales offices are also able to go-ahead.

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This post first appeared on thesun.co.uk

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