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Stamp duty concession triggers predicted buying surge


Published: 16 May 2012 | Author: Bernard Clarke

Data we published today showed that the end of the stamp duty concession for first-time buyers produced a predicted surge in house-buying. As expected, activity was heavily concentrated among those benefiting directly from the concession – first-time purchasers of homes priced between £125,000 and 250,000. But the complex pattern of transactions linked in chains meant there was also a significant increase in purchases by home-movers.

The end of the stamp duty concession on 24 March meant that first-time buyers took out 24,000 loans during the month, 74% more than in February and 57% more than in March 2011. The value of their loans totalled £3 billion, up 76% from the previous month and 67% year-on-year.

Almost two-thirds of first-time buyers (63%) bought properties priced between £125,000 and £250,000, thereby avoiding stamp duty as long as they completed their purchase before the deadline. That compares with an average of around 50% of purchases in this price band since 2006.

First-time buyers accounted for 42% of all house purchase loans in March, the highest proportion for 11 years. Among this group, 98% took out a repayment mortgage, the highest proportion since our records began.

First-time buyer activity had a knock-on effect on the rest of the housing market. Movers took out 27,200 loans, worth £4.3 billion, during the month, up 25% by volume and 19% by value on February.

The combined total of loans for house purchase in March was 44% higher than in February (40% higher by value). Compared to March 2011, lending for house purchase was up 31% by volume and 30% by value.

Remortgaging, however, was essentially flat, with £3.6 billion advanced during the month, unchanged from February and 14% lower than in March 2011.

If the March data represents a spike in transactions – as we would expect based on past experience – we are likely to see a decline in activity in the coming months. It will take some time before we can assess the extent to which initiatives like NewBuy and the re-invigorated right to buy will compensate for this effect.