Fear that the end of the property stamp duty holiday on 31 March 2021 could create a rush in mortgage demand followed by a significant dip is well documented, but the Help to Buy Scheme as we know it is set to wind up on the same date, which could exasperate the ‘cliff edge’ effect.
Members of the industry have written to Rishi Sunak to implore him to extend the stamp duty deadline, but the chancellor has already confirmed there will be no extension to Help to Buy.
Many in the mortgage market are concerned about the impact of the two incentives concluding on the same day and urge that clients be made aware of delays that may bring completions past the deadlines for the government schemes.
London and Country associate director of communications David Hollingworth says: “Either scheme closure has to bring some deadlines but for them to both be very much in sync poses some obvious potential challenges in the market for the first quarter of next year.
“At the same time there continue to be longer processing times in play as the mortgage market contends with some capacity issues and the need for a more individual assessment of sustainable income levels in an economy heavily affected by Covid.
“Conveyancers will be a critical part of the chain when it comes to meeting the stamp duty deadline and, with local searches already affected before we headed into Lockdown 2, it makes sense for them and for brokers to be setting client expectations early. With some delays already in the market, buyers should be reminded that purchases can take time and as we head towards Christmas it will be hard to make guarantees.”
Intermediary Mortgage Lenders Association executive director Kate Davies says: “There are undoubtedly buyers planning to use the current Help to Buy Scheme before it ends but much of the current activity in the market is being driven by the stamp duty holiday.
“Consumers are already being told that they must start their homebuying journey now to be in with a chance of benefiting from the tax incentive.
“With so many buyers’ plans resting on the potential stamp duty savings, the market will need to manage the expectations of consumers to avoid buyers pulling out of their purchase at the last minute. A collapse in just one part of the property chain could ultimately cause other purchases to fall through, so estate agents and advisers will need to encourage their clients to think realistically about whether they can complete before the stamp duty holiday ends.”
Some say borrowers may rush into a purchase before they’re ready in order to beat the deadlines, and all parts of the industry will feel the pressure to complete deals.
Accord Mortgages head of intermediary distribution Jeremy Duncombe says: “The withdrawal of two major home-purchase initiatives on the same day will put pressure on the whole market. Clients may feel rushed into one of the biggest decisions of their lives; brokers will be put under extreme pressure to get their clients the right products; and lenders and conveyancers will continue to have their capacity challenged.
“However, there is definitely an argument that government should look at ways to phase out the holiday, to ensure the market doesn’t suddenly come to a halt from 1 April.
“The changes to the Help to Buy Scheme were announced well in advance and the key is how the transition is communicated and supported.”
The importance of preparation ahead of the deadlines has been emphasised for brokers, lenders, lawyers and all areas of the industry to ensure processes go smoothly and to best serve clients.
HSBC head of intermediary mortgages Chris Pearson says: “This ‘cliff edge’ only truly becomes problematic if we fail to plan, prepare and communicate extremely well from now.
“We all have a role to play and it begins with setting realistic expectations on timescales with customers. We need to acknowledge that all components of the journey may be under extra pressure as the end date looms and demand heats up, and ensure customers enter the market with their eyes wide open to potential delays.
“From a lender’s perspective, we need to invest our time wisely in gearing up processing support functions, introducing self-serve and technology solutions, and working closely with third-party suppliers to agree resource and simplify procedures. But, what recent history has taught us is that you never know what is around the corner, with policies and prepared landscapes sometimes changing with little notice. We all need to be agile enough to deal with changes of plan.”
Hollingworth adds: “The more preparation that we do now in anticipation of increasing demand and expectation as the deadline looms has to be worthwhile.”
There is positivity that the industry will come through this potential challenge, as it has many times before. Duncombe says the market was performing well without the stamp duty cut due to the volume of pent-up demand, and can do so again.
“While the stamp duty relief has provided a huge boost, it can be argued that the market was performing remarkably well even before the announcement. Therefore I’m confident it will remain robust due to the underlying supply-and-demand imbalance of our sector.”
