HM Treasury has cut stamp duty for the majority of homebuyers but cost for £2 million properties increases hitting London harder than other areas.
Chancellor George Osborne announced in the Autumn Statement the new stamp duty will benefit 98% of all homebuyers including first time buyers, home movers and buy-to let properties.
The new stamp duty bands apply only to value of the property that falls within this band so there are no longer large changes when a home slips into the next band.
There is no stamp duty tax for the first £125,000 of the property value, followed by 2% on the next portion from £125,001 to £250,000, followed by 5% between £500,000 and £925,000, on the next portion 10% up to £1.5 million and 12% on any portion above this amount.
Average family homes benefit the most
The new system replaces the slab banding where a house priced at £250,000 would pay a stamp duty of £2,500 and one priced at £250,001 would cost £7,500. Where the house price is £500,000 the stamp duty was £15,000 and one priced at £500,001 would cost £20,000.
For first time buyers the arrangement fees, conveyancing costs and stamp duty land tax can make a difference when it comes to buying their first home.
HM Treasury data shows the biggest savings are being made with the average family homes valued at £275,000.
For a home mover buying an average family home worth £275,000 stamp duty was £8,250 and now saving £4,500 with a much lower cost of £3,750. This is a saving of 1.63% on the cost of their new home.
In London the average cost of a home is £510,000 and stamp duty has reduced £4,900 from £20,400 to a lower cost of £15,500. This is a saving of 0.96% on the cost of their new home.
For properties over £2 million the cost has increased from £147,000 to £165,750.
House prices likely to increase
The new stamp duty is likely to increase house prices in the short term as homebuyers around the £275,000 mark can afford to offer more. With a saving of £4,500 they can now offer closer to £280,000 without going over budget.
House prices are likely to increase by no more than 1% on average due to the stamp duty.
For remortgage buyers that are required to repay their loan by the lender, rather than downsizing and paying stamp duty tax can use equity rlease and agree a lifetime mortgage.
In London there are many properties costing more than £1 million and for a property of £1.5 million stamp duty increases from £75,000 to £93,750.
Older homeowners in London with considerable value in their property offers the equity release mortgage buyer access to cash to improve their quality of life or even help children start or expand a business.
What are your next steps?
Call our LCM mortgage brokers if you are a buy-to-let landlord with a property, remortgaging and want the best mortgage deal, buying your first home or you are planning to move home.
For equity release buyers our London City Mortgage advisers can recommend lifetime mortgages allowing you to receive cash from your home to buy a more expensive home or even reduce inheritance tax owed by your beneficiaries.
Start with a free mortgage quote or call us and we can take your details. Learn more by using the mortgage cost calculators, property value tracker chart and equity release calculator.
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