The burden of stamp duty in a market where house prices are rising is hindering some 77% of prospective of home buyers, according to the research by comparison site MoneySuperMarket.
Over half, 57%, of those polled claim they need to save for longer than planned to cover stamp duty fees, while a further 20% will rely on someone else to help meet stamp duty costs.
The average deposit potential home buyers currently have saved is £9,734. However, with the average UK house price of £183,577, this is less than a 5% deposit once the 1% stamp duty cost of £1,835.77 has been deducted, leaving the average buyer ineligible for a mortgage to buy a house in today’s market. The minimum deposit, even for a Help to Buy mortgage, is 5%.
The research also shows 49% of those currently saving for a deposit have been doing so for under five years, while a further 22% of people have been pitting money aside for between six and 10 years.
Furthermore, some 36% of those continuing to save expect to need a further five years to reach the level of deposit they need, while 19% will still need another six to 10 years.
‘Home ownership is something millions of people aspire to so it’s encouraging to see people are saving hard towards the goal of one day getting a foot on the property ladder, but it can seem like a relentless task. And with house prices rising again in many areas, that goal is being pushed further and further away,’ said Clare Francis, editor-in-chief at MoneySuperMarket.
‘On the plus side, the deposit requirements have eased. There are more 95% mortgages available than there were a year ago, helped by the launch of the mortgage guarantee element of the Help to Buy mortgage scheme in January.
This is enabling first time buyers to get on the property ladder sooner because they don’t have to save such a large deposit. However, with the current average deposit level sitting at less than four and a half per cent, many aspiring home owners still don’t have enough saved,’ she explained.
‘Then of course, stamp duty has to be factored in and this is another obstacle hampering home ownership. It’s enough to have to save the one per cent required for properties costing between £125,000 and £250,000, but stamp duty leaps to 3% above £250,000 and up to £500,000. The thresholds have been held at these levels for years now and rising property prices mean that an increasing number of first time buyers have to pay the 3% rate. This isn’t right and it’s time for the government to reform this tax,’ she pointed out.
‘Despite the barriers, it is good to see so many people saving towards their first home and those who can manage to scrape together a 10% deposit will find they are able to get their hands on some competitive deals. Buyers mustn’t be led by the interest rate alone though when comparing mortgages. It’s vital to factor in the fee as well and this can have a significant impact on the total cost over the term of the deal. So it’s worth doing the sums, as expensive fees can wipe out the benefit of a lower rate,’ she added.
