Stamp duty receipts surge in 2013 as housing market thrives

January 23, 2014, 4:46 am

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The housing market is making a contribution towards the Government's deficit reduction plan as stamp duty receipts surged in late 2013.

Statistics from HMRC show that the number of residential property transactions reached 111,080 in November – the highest level in six years.

The strong transaction levels reflect other areas of the market, such as valuations, which experienced record levels of activity in November as awareness of the Government’s Help to Buy scheme begin to spread.

Despite a slight fall of 3% in the number of housing transactions in December, to 107,620, this still represented an increase of 35% on the same month in 2012.

Provisional figures for the final months of 2013 show stamp duty receipts soaring to £960 million in December. This represents a rise of 23% on the previous month and 62% on December 2012.

Stamp duty income for the final quarter, which reflects the launch of the second phase of Help to Buy in October, rose to around £2.6 billion – 3.5% stronger than the previous quarter and 42% higher year-on-year.

Rising Prices Drag Thousands into Higher Band

The strong performance of the housing market, boosted by schemes including Funding for Lending and Help to Buy, has seen average house prices approaching £250,000.

The latest House Price Index from the Office of National Statistics showed that average prices had reached £248,000 after rising by 5.4% in the year to November.

This is significant for homebuyers as a purchase price of £250,000 sees the rate of stamp duty increase from 1% to 3%.

Schemes targeting first-time buyers have also dragged thousands of new buyers over the first stamp duty threshold of 1%, which applies when the purchase price exceeds £125,000.

The ONS reported that the buying price of property types sought by first-time buyers rose by 6.4% in the year to November.

Purchase Price	Stamp Duty Percentage
£0 - £125,000	0%
£125,000 - £250,000	1%
£250,000 - £500,000	3%
£500,000 - £1,000,000	4%
£1,000,000 - £2,000,000	5%
£2,000,000+	7%
£2,000,000+ [Bought by corporation]	15%

Find out more about stamp duty charges here.

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Bank of England to lower maximum Help to Buy loan?

January 24, 2014, 4:04 am

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The Bank of England is reportedly considering a change in the Help to Buy scheme to reduce the maximum mortgage loan.

The governor of the Bank of England, Mark Carney, told the BBC’s Newsnight he was concerned about the momentum that has picked up in the housing market.

He may now consult the Treasury about reducing the maximum loan size for the second phase of the Help to Buy scheme.

Currently, the scheme offers lenders a guarantee worth up to 15% of the value of a mortgage for properties valued up to £600,000.

This is over four times the value of the average mortgage advanced via Help to Buy so far, which stands at a little under £150,000.

Statistics show that the scheme has mostly benefited first-time buyers based outside of London and the South East. But it is these high-price regions that are most likely to be affected if the maximum loan size is reduced.

And capping the opportunity to fuel house price growth in these heated regions may yet persuade members of the Monetary Policy Committee that interest rate rises are not yet needed to kerb the momentum in the housing market.

"We took some initial steps to address that momentum," Dr Carney said, referring to the Bank’s decision to redirect the Funding for Lending scheme away from residential mortgages and towards small business lending. "We took our foot off the accelerator."

Mark Carney, Newsnight (Jan 2014)

"We’re not hitting the brake yet on the housing market, because transactions are about three-quarters of what they were before the crisis, the longer term average. Mortgage approvals are about the same level. Prices have bounced off recent lows.

"There's much more to the housing market than just what’s happening in London and the South East, and we have to make national policy," he said.

Adam Posen, formerly of the Bank of England’s Monetary Policy Committee, has also weighed in with calls to "dampen" the Help to Buy scheme before it creates a new property bubble.

Mr Posen described the equity loan as "sort of useful", but said the Bank ought to be thinking about raising the loan-to-value requirements of Help to Buy (currently available up to 95%) or "generally trying to tighten it".

What do you make of the Help to Buy scheme? Are you a first-time buyer who has benefited from the scheme or hopes to benefit from it in the future? Will it affect your plans if the maximum loan is reduced from £600,000? Drop us a comment and let us know!

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Millions with no savings for an emergency

January 24, 2014, 6:23 am

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Millions of people have no savings to fall back on in the event of an emergency, the Money Advice Service has found.

In a poll of over 2,000 people, a third confessed that they have no savings to draw upon in the event of an emergency.

Yet, more than double this number – 71% – experienced an unexpected cost that caused havoc to their budgets.

Almost three in ten (29%) have faced car repair bills averaging £1,341, while around one in seven people experienced washing machine repair charges (av. £245), vetinary bills (av. £248), and/or the cost of a broken tech device (av. £294).

The service described these people as ‘living on the edge’ from day to day, with many left to worry about how they would make ends meet if they encountered a costly unexpected problem.

The struggles have been compounded by families striving to help each other out of a hole.

Around one in eight (12%) ended up offering emergency loans to friends or family members worth an average of almost £2,500.

Home and Cash

Save £3 a Day

The Money Advice Service recommends that, in an ideal world, people should have enough money to cover essential outgoings (mortgage, food, utility bills, etc) for three months.

But for those struggling to build up an emergency fund, it is recommending that people save £3 per day to prepare for any unexpected costs that may arise.

The advance planning will offer some peace of mind for those without savings, while those with a nest-egg will have less need to dip into it if an emergency arises.

Where to Build Your Emergency Savings Fund?

Frustratingly, the returns available on easy-access savings accounts are fairly weak at the moment.

Nevertheless, if you find that you are able to gather £90 per month, it is worth investigating where you might get the best returns for your cash.

Some of the best rates are available through regular saver accounts, which reward regular monthly deposits of as little as £10 with above-inflation rates of interest.

However, the majority of those offering instant access to funds are branch-only accounts (Kent Reliance – 4%, Nottingham – 3.10%, Leeds – 3.05%), so emergency savers would need to access a branch to pay in and withdraw the cash.

Aside from this, it is worth using up your cash ISA entitlement (£5,760 this tax year), as no tax is payable on the interest you earn through these accounts.

(Find out more about cash ISAs here.)

The Direct ISA through National Savings & Investments (NS&I) currently offers 1.75%, and money can be withdrawn at any time. However, the popularity of this account has led to a succession of rate cuts, and it is due to fall again to 1.50% at the end of February.

A variety of local lenders, including Stafford Railway, Mansfield, Darlington, and Hinckley & Rugby, will match this 1.75% offer. All of these accounts are predominantly branch-based, though they can also be managed by post.

All are worth investigating, depending on your location, to generate more from your hard-fought efforts to save.

Money Advice Service Unexpected Costs

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Unsecured debt rising

June 23, 2005, 8:46 am

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