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House sales tumble following end of Stamp Duty holiday

House transactions in England slumped to the lowest October on record since the 2008 financial crisis, according to figures from HM Revenue & Customs.

Records show a total of 66,830 sales in October, down a massive 52% on September, which saw the last saving on Stamp Duty as the market recovers from the effects of the pandemic.

In real terms, it means a reduction of a third year-on-year in England. The rest of the UK however had a slightly more positive reaction, with Wales’ Stamp Duty holiday already having ended alongside the first deadline in June.

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“While on face value the figures are quite a stark and alarming indication of the housing market, it is not entirely surprising” says Andy McBride, director of Professional Contractor Mortgages. “There was always going to be a big drop off following the two-stage Stamp Duty relief program, and having already seen a big drop in July, this comes as no shock.”

In preparation for what is anticipated to be a record year in 2022 for remortgage business, it appears that lenders have already begun to target different areas of business to sustain application levels, with one lender making dramatic changes this week.

“Contractor friendly lender Accord have made one of the biggest single changes in memory this week, by removing both the minimum income level on Buy to Let applications, as well as beginning to lend to those who have not previously owned residential property” adds McBride.

“With the annual mortgage market worth around £250bn to the UK economy, predictions are that 2022 will see more than that in remortgage business alone.”

With rates having been at their lowest levels for the last few years, it is likely that those who have a deal expiring in 2022 could be shocked at the impact of switching to the lender’s Standard Variable Rate.

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“Due to the financial market and projections around property pricing and interest rates there was a very noticeable switch to longer-term fixed rates around 4 or 5 years ago” continues McBride. “As a result, January has the highest number of product expiry dates that has ever been recorded. Given that most of those will be fixed rates and will be significantly lower than the respective Standard Variable Rate, borrowers face a shock in February.”

Historically, borrowers have been less aware of the options to save interest over the course of their mortgage, with many having had their current mortgage for many years. While not required, the impact of switching rates regularly has often been overlooked.

“There is something of an old fashioned view that the only time you had to take out a new mortgage was when you either bought a house or wanted to borrow more” concludes McBride. “This means we speak to people daily who have been with their current lender without having changed product or rate for sometimes a decade or more.”

“The financial cost of such a decision however is potentially huge. With the lowest SVR’s around 3.6%, and the average fixed rate with a 60% loan to value still around 1%, the cost difference is approaching £250 per month per £100,000 of mortgage debt.”

“With rapidly increasing inflation and interest rates set to rise, there has never been a better time to look at remortgage options than now.”