House prices rise by 5% as end of coronavirus lockdown and stamp duty relief fuels a buying boom

HOUSE prices leapt again in September growing at their fastest rate in fours years, new figures show.

Prices increased by 5% in September compared to the same month last year as the end of the coronavirus lockdown and stamp duty relief boosted buying.

That's the biggest yearly rise for the month of September since 2016 according to new figures from building society Nationwide's house price index.

House prices also increased on the previous month, rising by 0.9% compared to August.

The average house price was £226,129 in September – just over £2,000 more than in August.

The new figures signal continued momentum in the housing market which had been lifted by the stamp duty holiday introduced by chancellor Rishi Sunak over the summer.

What is stamp duty?

STAMP duty land tax (SDLT) is a lump sum payment anyone buying a property or piece of land over a certain price has to pay.

Up until July 8, most house-buyers in England and Northern Ireland had to pay stamp duty on properties over £125,000.

This was temporarily increased to £500,000 until March 31, 2021 in the government's mini-Budget in July 2020.

The rate a buyer has to fork out varies depending on the price and type of property.

Rates are different depending on whether it is residential, a second home or buy-to-let, or whether you're a first-time buyer.

The usual system in England for residential properties means:

  • First-time buyers pay nothing on properties below £300,000 (and relief available on properties of up to £500,000)
  • You pay nothing if the property costs below £125,000
  • You pay 2 per cent if it is worth between £125,001 and £250,000
  • You pay 5 per cent if between £250,001 and up to £925,000
  • You pay 10 per cent if it is between £925,001 and £1.5million
  • You pay 12 per cent on anything over £1.5million

For second homes or buy to let properties:

  • 3 per cent on purchases up to 125,000
  • 5 per cent on purchases between £125,001 and £250,000
  • 8 per cent on purchases above £250,001 and £925,000
  • 13 per cent on purchases above £925,001 and £1.5 million
  • 15 per cent on purchases above £1.5 million

Stamp duty rates are different in Scotland and Wales.

House sales were paused at the height of the pandemic and the property tax cut was designed to boost homebuying.

Robert Gardner, Nationwide's chief economist said: “Housing market activity has recovered strongly in recent months."

“The rebound reflects a number of factors. Pent-up demand is coming through, with decisions taken to move before lockdown now progressing.

"The stamp duty holiday is adding to momentum by bringing purchases forward. Behavioural shifts may also be boosting activity as people reassess their housing needs and preferences as a result of life in lockdown."

House prices increased in all areas of the UK in the three months of July, August and September.

The largest rises were seen in the south west (5.5%), outer London (5%) and the south east outside of London (4.8%).

Nationwide last month said that the average UK house price increase by 2%, the largest rise in a single month in 16 years.

Separate data from the Bank of England yesterday showed mortgage approvals surged last month.

There were 84,700 loans approved in August for buying a home compared to 66,000 in July, the highest level of approvals in 13 years.

But experts have warned that the boom could be short lived as the furlough scheme winds down at the end of October and the economic outlook remains a worry.

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: "The housing market recovery could not be more evident, with lenders, mortgage brokers, surveyors, solicitors and estate agents all working flat out to get deals across the line. 

"Whether this momentum can be maintained throughout the winter is another matter.

What help is out there for first-time buyers?

GETTING on the property ladder can feel like a daunting task but there are schemes out there to help first-time buyers have their own home.

Help to Buy Isa – It's a tax-free savings account where for every £200 you save, the Government will add an extra £50. But there's a maximum limit of £3,000 which is paid to your solicitor when you move. These accounts have now closed to new applicants but those who already hold one have until November 2029 to use it.

Help to Buy equity loan – The Government will lend you up to 20% of the home's value – or 40% in London – after you've put down a 5% deposit. The loan is on top of a normal mortgage but it can only be used to buy a new build property.

Lifetime Isa – This is another Government scheme that gives anyone aged 18 to 39 the chance to save tax-free and get a bonus of up to £32,000 towards their first home. You can save up to £4,000 a year and the Government will add 25% on top.

Shared ownership – Co-owning with a housing association means you can buy a part of the property and pay rent on the remaining amount. You can buy anything from 25% to 75% of the property but you're restricted to specific ones.

"First dibs" in London – London Mayor Sadiq Khan is working on a scheme that will restrict sales of all new-build homes in the capital up to £350,000 to UK buyers for three months before any overseas marketing can take place.

Starter Home Initiative – A Government scheme that will see 200,000 new-build homes in England sold to first-time buyers with a 20% discount by 2020. To receive updates on the progress of these homes you can register your interest on the Starter Homes website.

"The economic outlook is not encouraging with the end of the furlough scheme and mortgage payment holidays potentially exerting some financial pressure on homeowners."

Jeremy Leaf, north London estate agent and a former residential chairman of the Royal Institution of Chartered Surveyors (RICS) , said:

"Certainly increased restrictions and the unwinding of the furlough scheme will have some impact on confidence but not much at the moment.

"Of just as much concern to our buyers, and particularly those vital first-time buyers, is mortgage accessibility with lenders running the risk of reducing activity in the market at a time when it is so vital to the economy generally."

Lenders have pulled many mortgage deals aimed at first-time buyers as a result of the coronavirus crisis.

Mortgages which require a smaller deposit of 10% have become rarer and for those still available the terms have become stricter.

TSB made home loans with a 10% or 15% deposit available for just a single day while Barclays and Natwest have capped the amount you can borrow.

Leading economists predict house prices will start to fall "significantly" by the end of the year and in the first half of 2021.

House prices have soared since the coronavirus lockdown was eased but it's left many buyers and sellers wondering if it will last – here's what the expert says.

Homeowners are being stung by hidden property costs that often leave them thousands of pounds out of pocket.

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