How the Interest Rate and Stamp Duty Changes may affect you.

Information sourced from Propertymark, BBC news and gov.uk

Interest Rate Rise 22 September 2022

The Bank of England has raised interest rates from 1.75% to 2.25% - the highest level for 14 years - and warned the UK may already be in a recession. The central bank had previously expected the economy to grow between July and September, but it now believes it will shrink by 0.1%. It is the Bank's seventh rate rise in a row as it tries to tame soaring prices. It takes borrowing costs to their highest since 2008, when the global banking system faced collapse.

Inflation - the pace at which prices rise - is currently at its highest rate for nearly 40 years, leaving many people facing hardship. Prices are also widely predicted to head higher in October, despite a government plan to limit soaring gas and electricity prices for households and businesses. Raising interest rates makes it more expensive to borrow which should, in theory, encourage people to spend less and cool prices.

But many households with mortgages will see their costs rise. People on a typical tracker mortgage will have to pay about £49 more a month, while those on standard variable rate mortgages will see a £31 increase.

Those on fixed-rate deals will not be immediately affected, although their costs could jump when their deals come up for renewal. The Bank now expects the UK economy to shrink between July and September. This comes after the economy already shrank slightly between April and June and will push the UK into recession, defined as when an economy shrinks for two consecutive quarters.

It said a smaller-than-expected bounce back in July from the June bank holiday to celebrate the Queen's Platinum Jubilee and the additional bank holiday in September for the Queen's state funeral had both hit the economy. The Bank, however, said it now expected inflation to not rise as high as it originally expected, saying the government's help on energy bills for households and firms would help limit soaring prices.

Stamp Duty Changes 23 September 2022

Chancellor Kwasi Kwarteng has confirmed a permanent stamp duty cut in the mini-Budget announced this morning.

The government is reforming stamp duty by doubling the level at which people begin paying this from £125,000 to £250,000. This government is also committed to helping first-time buyers get on the property ladder in two ways. Firstly, by increasing the level first-time buyers start paying stamp duty from £300,000 to £425,000. In addition, the government is allowing first-time buyers to access the relief when they buy a property costing less than £625,000 rather than the current £500,000.

These measures will reduce stamp duty bills across the board for all movers by up to £2,500 with first-time buyers able to access up to £11,250 in relief. The government says that growth is its top priority and by taking these measures will boost the property market, in turn helping businesses expand to help fuel the wider economy’s growth.

Doubling the nil-rate band will enable up to 29,000 more people to move home each year, in turn boosting household consumption, which will increase confidence in the economy and support thousands of businesses who rely on the property market. This includes, for example, estate agents, cleaners, builders, contractors, removals companies, plumbers, decorators, and others.

First-time buyers

For first-time buyers the expenses which come with buying a new home can be off-putting, to help them the government raising the amount they can spend on a new house without paying any stamp duty. They will now not pay it if their first home costs less than £425,000, an increase of £125,000 on the current threshold. If though a first-time buyer does spend more than £425,000, they will now be entitled to relief – meaning they will pay 5% SDLT – up to £625,000, an increase of £125,000 from the current limit.

You can also use this table to work out the SDLT for the purchase price of a lease (the ‘lease premium’).

Property or lease premium or transfer value                            SDLT rate

Up to £250,000                                                                                                Zero

The next £675,000 (the portion from £250,001 to £925,000)       5%

The next £575,000 (the portion from £925,001 to £1.5 million)  10%

The remaining amount (the portion above £1.5 million)              12%

Example

In October 2022 you buy a house for £295,000. The SDLT you owe will be calculated as follows:

·      0% on the first £250,000 = £0

·      5% on the final £45,000 = £2,250

·      total SDLT = £2,250

If you’re buying your first home

You can claim a discount (relief) if the property you buy is your first home. This means you’ll pay:

• no SDLT up to £425,000
• 5% SDLT on the portion from £425,001 to £625,000

You’re eligible if you and anyone else you’re buying with are first-time buyers. If the price is over £625,000, you cannot claim the relief. Follow the rules for people who’ve bought a home before. 

Example You are a first-time buyer and purchase a property for £500,000. The SDLT you owe will be calculate:

• 0% on the first £425,000 = £0
• 5% on the remaining £75,000 = £3,750
• total SDLT = £3,750

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