Is race for a cheap mortgage the new stamp duty deadline? Sales jump TWO THIRDS in September as buyers seek to get ahead of a base rate rise

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  • HMRC data shows 68% monthly growth in property transactions in September
  • Stamp duty holiday, which has spurred past activities, was reducing
  • Some experts say the threat of rising mortgage rates is now attracting buyers
  • Also predicts another ‘shopping frenzy’ before a possible base rate hike

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The number of homes bought and sold in the UK increased by two-thirds in September compared to August, with experts believing that buyers are trying to get ahead of a potential rise in mortgage rates.

As per the latest data from HMRC, there were around 161,000 property transactions in September on a seasonally adjusted basis, up 67.5 per cent over the previous month.

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They grew by 68 per cent over September 2020 and 63 per cent over the ‘normal’ market average in September 2017 to 2019.

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If the Bank of England base rate rises, mortgage costs could go up

Experts say the sharp increase was only partly a result of the government’s stamp duty holiday, which spurred an increase of around £25,000 in the previous year, but eventually ended on 30 September.

This initially allowed buyers to save up to £15,000 in taxes as they were not required to pay stamp duty on the part of their property purchases under £500,000.

But in September, the tax break would have had a more subdued effect.

In England and Northern Ireland, this was reduced between July and September so that buyers could only save £2,500.

And the holiday had already ended in Scotland and Wales on 31 March and 30 June respectively.

Given that the effect of the stamp duty holiday was waning, some suggest that other factors have become more important in maintaining the high level of activity in the housing market.

According to Lawrence Bowles, senior research analyst at Sevilles, there are many things at play.

“There is more to this activity than just the stamp duty holiday: record-low mortgage rates, a desire for more space, and a core of unfulfilled demand, all drive up transaction volume,” he says. it is said.

While it is one of the many reasons why the housing market remains hot, the desire for cheap mortgages has become a pressing issue for buyers in recent days and weeks.

This is because speculation about the Bank of England raising the base rate has threatened an increase in the current super-low rates.

Right now, rates are available as low as 0.89 percent – but they are already on the rise. At its lowest level, the cheapest fixed rate on the market was 0.84 per cent.

After months of sustained declines, major lenders including NatWest, HSBC and Barclays have raised rates on some mortgages.

With some predicting an increase in the base rate for December, experts are suggesting that the threat of a hike in mortgage rates is the ‘new stamp duty holiday’ and the rush to complete the sale before the rate hike is now booming in the housing market. is bringing

Simon Bath, chief executive of technology company iPlace Global, which created property advice app Movable, says: ‘We have reached another crossroads, with another possible deadline for Brits to prepare for, after the stamp duty holiday .

‘It seems likely that home prices will continue to rise before demand subsides, as Britons race to achieve lower mortgage rates.’

Rising costs: According to data from property platform RightMove, homebuyers have seen a £5,000 increase in the sale price in the last month alone.

Rising costs: According to data from property platform RightMove, homebuyers have seen a £5,000 increase in the sale price in the last month alone.

The initial data supports his price rise theory. According to RightMove’s latest house price index, which covers the first half of October, the average home price jumped £5,000 over the previous month.

In addition, each UK region broke demand price records for the first time since March 2007.

The property portal in its report noted: ‘Continuous brisk turnover of properties for sale and a window of opportunity to buy ahead of potential interest rate hikes has surpassed the final cessation of all stamp duty incentives and the activity continues to remain strong. Huh.’

This trend is bullish in the market for now, but could it really spark another buying frenzy? Ian McKenzie, chief executive of The Guild of Property Professionals, says so.

“With demand for properties still high, and with a potential mortgage rate rising on the horizon, it could be the perfect storm to see another buying frenzy, as long as stocks continue to run short,” he says. ,’ they say.

There is also a simple fact that those who tried to meet the September stamp duty deadline but failed, are unlikely to give up on their purchases, and will continue to add to the total in the months to come. .

But others aren’t sure about the point of another shopping boom. With only a 0.1 percent to 0.25 percent increase in the base rate, the difference in people’s mortgage payments could be only a few pounds a month.

For example, for a person with £120,000, a two-year fixed rate mortgage on a £200,000 home, the difference between the 0.89 per cent rate and the 1.04 per cent rate would be just £8 per month, or just under £200. during the specified period.

Office for National Statistics data showing an increase in home prices over the past 15 years

Office for National Statistics data showing an increase in home prices over the past 15 years

Mark Harris, chief executive of mortgage broker SPF Private Clients, says: ‘People will still go without stamp duty holidays and continue to refinance their homes, whether mortgage rates are less than 1 percent or around 2 percent.

‘Borrowers are willing to secure these historically low mortgage rates, but if the right property comes along, they are still likely to buy, even if they have to pay 15 basis points more and they are eligible for the stamp duty holiday. will not be eligible.’

But as stamp duty leave proved, the psychological effect of thinking you’re saving money can be powerful, even when the actual cash savings are negligible.

While the buyers actually ‘saved’…

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