Bridging can offer the solution for those worried about the stamp duty deadline.
The initial effects of the first lockdown saw the country all but close, however as the restrictions eased, towards the end of the year, mortgages advisers saw a massive uplift in purchase activity.
This was spurred by the increase in the nil rate stamp duty band which amplified the confidence of both buyers and sellers.
This unseasonal uplift in property transactions does however cause an issue, which is on the near horizon and approaching at a pace. Many customers currently in the process of buying will be apprehensive of completing the transaction on their dream home ahead of the stamp duty holiday ceasing on the 31st March.
We are all aware of the servicing issues amongst lenders and solicitors, as this bottle neck continues to grow, the anxiety levels will further increase. This is by no way a dig at the lenders or the solicitors, it is a by-product of a UK government tax incentive, alongside a major pandemic which has seen lenders having to process payment holidays, review lending criteria to fit a changing market and in some cases switch to a more manual underwriting process. Solicitors have also seen a longer processing time for items such as necessary searches when buying a property.
Adding weight to this is data published by the L&G Mortgage Club indicating that it will take more than 120 days to apply for and complete on a mortgage. Estimations are that there are over 365,000 mortgage applications currently in the pipeline that may miss the stamp duty deadline on the 31st March.
If not already doing so I would urge any mortgage advisers to be managing expectations of their clients and perhaps be discussing measures for alternative solutions if the desire is to complete before the stamp duty deadline.
Bridging finance offers a quick solution that can help clients bridge the gap over the current back log or a solution if the property chain has broken due to purchasers withdrawing or customers having mortgage offers cancelled.
We have experts at Clever Lending that talk any advisers through this solution to see if it’s viable for their clients, the key thing however is act now and be prepared.
We always work hard with advisers to manage application to completion with any time critical cases. However, we do understand that many mortgage advisers have not been involved with a bridging case before which is why we can do the regulated advice for you should you require, it’s your choice.
Be prepared and we are here to help you, just talk the case through with us, it may be the solution needed and may just save your clients their dream home.
The Governments position on extending the stamp duty holiday
(Note: This response was received pre-Christmas and the most recent lockdown)
There is a strong push from the industry to extend the stamp duty holiday past the 31st March, with many industry commentators predicting an extension of sorts. However, the government provided the response below.
More than 22,000 people signed a petition calling for the stamp duty holiday to be extended for a further six months.
The petition stated: “Extending the stamp duty holiday for an additional six-months will assist many buyers who are looking to move to a property that they will not be able to afford otherwise. This will help to stabilise the housing market.”
As it received over 10,000 signatures, the government was required to respond.
The Treasury said the stamp duty holiday was designed to be a “temporary relief” to stimulate market activity and support jobs that rely on the property market.
“The government does not plan to extend this temporary relief”, it stated.
It added that the pandemic caused uncertainty for buyers and sellers with property transactions down by as much as 50% during the first lockdown
“To stimulate immediate momentum in the property market and to support the jobs of people whose employment relied on custom from the property industry, the government decided to introduce a temporary Stamp Duty Land Tax (SDLT) relief. This relief increased the starting threshold of residential SDLT from £125,000 to £500,000 from the 8 July 2020 until 31 March 2021. Since the relief was introduced, transactions have increased and seasonally adjusted data shows that in October 2020, transactions were 8% higher than October 2019.
“As the relief was to provide an immediate stimulus to the property market, the government does not plan to extend this relief. SDLT is an important source of government revenue, raising several billion pounds each year to help pay for the essential services the government provides,” it said.
The Treasury confirmed it will maintain the stamp duty relief for first-time buyers which increases the starting threshold of residential SDLT to £300,000 for property purchases below £500,000.