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HM Treasury - Stamp Duty Land Tax exemption limit increased (UPDATE 14th August 2009)

14th August 2009

Further to the report below, HMRC have extended the deadline date to the 31st of December 2009 before the 1% Stamp Duty threshold returns to the £125,000 figure.

The website link for this reference is: HMRC Stamp Duty Thresholds

Thank you to Catherine Allen at SAS Daniels Solicitiors for this added information.

7th August 2009

Further to last years Treasury announcement of a temporary increase in the lower threshold for Stamp Duty Land Tax to £175,000, we are now in the closing month before the limit returns to the previous level of £125,000.

As yet there have been no indications from the Treasury that this increase will be extended beyond September 2009 and as such any buyers wishing to take advantage of the increase should act fast.

Given that property purchase transactions take some 6 to 8 weeks, most buyers will now have missed the boat to take advantage of this temporary increase.

Stamp Duty Land Tax rates will return to the following levels in September 2009:
- Property purchases not exceeding £125,000 will incur no Stamp Duty Land Tax Charge
- Property purchases over £125,000 but not exceeding £250,000 will incur a 1% Stamp Duty Land Tax Charge
- Property purchases over £250,000 but not exceeding £500,000 will incur a 3% Stamp Duty Land Tax Charge
- Property purchases exceeding £500,000 will incur a 4% Stamp Duty Land Tax Charge

2nd September 2008

Since the 'leak' from the Government back in August 2008 that the Chancellor was 'considering' proposals for boosting the housing market, on Tuesday 2nd September 2008 we saw a press release from the Treasury.

It is understood that the Chancellor was considering measures for the deferment of payment of this tax or temporary suspension of such charge.

This announcement tells us that the lower level has been increased from £125,000 up to £175,000 for a 12 month period.

Whilst this will encourage some buyers back into the market place, the higher limits of £250,000 and £500,000 at which Stamp Duty is charged at 3% and 4% respectively should perhaps also have been reviewed and increased accordingly to encourage buyers at these levels to further their house purchase goals.

The new level will assist those buyers (especially First Time Buyers) wanting to purchase properties below this new level, but unless the sellers of those properties have some incentive to make their onward move, potentially into these higher bands, it is unlikely to have much of an impact.

The wording from the Treasury's website is detailed below.

88/08

2 September 2008

Stamp Duty
The Chancellor of the Exchequer has today announced that stamp duty land tax will not apply to purchases of residential property of £175,000 or less.

This will provide an exemption from stamp duty land tax for land transactions consisting entirely of residential property where the chargeable consideration is not more than £175,000.

This relief will apply to transactions with an effective date on or after 3rd September and before 3rd September 2009.

Nationwide Report - House Prices (31st July 2009)

Nationwide Building Society make regular reports on how they believe the Housing Market is performing based on recent Budget, Rate, Economical and Political circumstances.

Nationwide as an institution is widely regarded as a balanced and considered lender and its views and that of its Economists are similarly thoughful.

Nationwide Buildings Society obtains its data from its own in-house information centres and we would add that in reports examined through 2008 and 2009, the house price index of Nationwide, isnt necessarily a true reflection across all property transactions.

Follow this link for the latest full report: July 2009

Nationwide also produces a quarterly report analysing house prices and influences region by region, this report can be found via the following link: Quarter 2 - 2009

The Clayton Hulme Partnership believes the report is collated with care and attention to detail, but no representation is made as to its accuracy or completeness. Persons seeking to place reliance on these reports or this Index for their own or third party commercial purposes do so entirely at their own risk.

Previous reports are available at the nationwide House Price Index Website: Previous HPI Reports

Bank of England Rates remain at 0.5% (6th August 2009)

Almost a reiteration of our July bulletin with little expectation that rates will rise in 2009, the outlook for 2010 is still uncertain.

Quantative Easing (QE) measures are bolstered yet again with an increase of a further £50bn adding to the already vast £125bn, taking the input to QE measures to £175bn. This measure can also be used as a mechanism to maintain the government’s inflation targets of 2%. CPI inflation in June fell to 1.8%, the fall mainly attributed to lower food and energy costs although sterling’s weakness in the currency markets appears to be balancing out these reductions and applying an upward pressure on inflation.

In the minutes of its July meeting, the MPC acknowledged, “The weakness of bank lending continued to hang over the prospects for recovery. It was likely that demand for loans had fallen and also that the ability of UK banks to lend was being constrained by a lack of capital.”

Low rates could remain for some time to come and we would expect rates to remain low until Easter 2010 before rates increase in earnest but the uncertainty is still very much in the frame and we should expect rates to increase as quickly as they had fallen. The question remains – when?

The next meeting of the MPC will be on the 10th of September 2009. A lengthy Press Release from the Bank of England about this reduction can be found at: Go to Bank of England Press Release

Historical information on the BoE base rate is available from their statistical department at: Go to Bank of England Statistics website

Fixed rates UP, Tracker margins DOWN, Deposit requirements still HIGH – but why?

7th August 2009
Key factors dictating mortgage lenders ability to lend are risk, cost of borrowing and the regulatory framework. They are keen to demonstrate to their critics and the regulators that they are lending sensibly and responsibly once again. They are also keen to demonstrate to their shareholders that they are a safe bank and loans are provided only against adequate security.

The facts are:
- Lending secured against a perceived falling UK property market is considered risky.
- Cost of borrowing [for the lenders] is at an all time low with the 3-month LIBOR at 0.8875% (as at 7th of August 2009).
- Regulators dictate a disproportionate Capital Adequacy requirement in respect of lending provision.

So why do we find such difficulties in obtaining mainstream mortgage lending at comparative rates when compared to cost of borrowing?

One argument is that the lenders are taking in deposits from savers and funds from central banks to stockpile in their reserves to satisfy the Capital Adequacy requirements as laid down in the Basel II legislation.

Another is that there are so few ‘active’ lenders in the UK mortgage market, they can call the shots on pricing, and maintain artificially high profit margins on the loans being made to reduce the impact of possible future losses.

The truth would appear to be a bit of both. Detailed discussions with one mainstream lender, simplifies the issues.

It would appear that a lender lending £150,000 on a property worth £200,000 (at 75% loan to value) will have to keep circa £300,000 ‘in the bank’ to satisfy the requirements and yet it would seem, the same £150,000 loan on a property worth £167,000 (at 90% loan to value) will have to retain £600,000 ‘in the bank’ to satisfy the requirements.

In essence, the lender lending at 75% loan to value has to cover earnings on a total ‘commitment’ of £450,000, whereas, a lender lending at 90% has to cover earnings on £750,000 commitment using our example above, and the pricing of these products calculated accordingly.

Pressure on lending is still high as more buyers filter into the market. The predictions for rate rises over the next 24 to 36 months brings higher fixed rate mortgage costs with many continuing to rise throughout July.

Tracker margins have reduced slightly and are expected to continue to reduce but not as quickly as fixed rates are rising.

Choice of mortgage product is very much wide open but the lenders available still limited and suffering from poor service standards and delays in processing mortgage applications.

90% lending is still hard to obtain and remains at a high cost with many 90% products well into the late 6%'s. Higher deposits or levels of equity are still very much the order of the day.

Housing market - is it on a recovery? It would certainly appear so!!

7th August 2009
We have heard from lenders such as Nationwide and Halifax over recent months with reports of house prices going down, going up, even conflicting views on what is actually happening in any given period.

Then in July, the Land Registry figures, which are more rounded, and wide ranging than those of lenders own reports, brings news that the average house price has risen – by 0.1%. In the FT House Price Index report published by Acadametrics this morning, we see three key headlines:
- House prices in July rose by 0.1%
- Prices are now 10.9% lower than a year ago
- Housing Transactions are on the increase

The latter is one of particular interest, which details further that there were 27,000 property transactions in January 2009, rising to 47,000 transactions in June.

Given that the Land Registry figures are based on actual ‘sold’ prices, this is a true indication that confidence has returned to the housing market and buyers are actively making that move. One particular comment gives further confidence stating, “Overall, the evidence suggests that the market is ‘bottoming out’.” This report can be found via the Acadametrics link below.

More importantly, it indicates that the First Time Buyer is actively making that move as no chain can commence and complete without a First Time Buyer or similar ‘’chain starter’.

Yesterday (6th of August 2009), the Royal Institute of Chartered Surveyors (RICS) published a press release suggesting that they expect house prices to rise in 2009. Having previously predicted a 10% to 10% fall in 2009, they have revised their prediction to state that the average house price in Q4 of this year will be higher than in Q4 in 2008. They do however suggest that “Caution still the watchword”.

RICS have probably been one of the most cautious commentators on the housing market and these latest comments are certainly a sound and useful base rather than industry hype.

Whilst the previous views of Chartered Surveyors on property prices and values has held back recovery, it is the lack of available cost effective mortgage lending that is the main restriction moving forward.

Further reports and commentary on the housing market and prices can be found at:
Royal Institute of Chartered Surveyors: RICS Housing Market Report
FT House Price Index: Acadametrics website
Nationwide Building Society: March 2009
Rightmove: Rightmove website
http:/www.rightmove.co.uk/