Stamp Duty Changes 2025: What’s the Impact on Mortgages?

What We Know About the Stamp Duty 2025 Changes So Far

The government has confirmed several key updates to SDLT, effective from April 1, 2025:

• First-time buyers(FTBs) : The SDLT threshold will decrease from £425,000 to £300,000. FTBs purchasing properties above £300,000 will now incur stamp duty costs, increasing the financial burden on those entering the property market. For example, a FTB buying a £500,000 property would face a £10,000 stamp duty bill under the new rules, whereas previously, they would have paid £3,750.
• Home movers: The standard stamp duty threshold will revert from £250,000 to £125,000. This change means that home movers will start paying stamp duty on properties priced above £125,000, increasing the overall cost of moving. For instance, purchasing a £295,000 home will result in a £4,750 stamp duty bill under the new rules, compared to £2,250 previously.
• Buy-to-let investors: While specific changes to the surcharge for additional properties have not been confirmed, the reduction in the standard threshold to £125,000 will result in higher stamp duty costs for investors, making property investment more expensive.

These changes aim to increase government revenue and address housing affordability issues. However, they also raise concerns about the potential impact on the housing market and buyer behaviour. The Spring Budget may bring further clarification, but until then, it is unclear.

How the Stamp Duty 2025 Changes Could Impact Mortgage Affordability

While stamp duty itself doesn’t directly impact mortgage affordability, as lenders don’t include it in their lending criteria, the increased upfront costs can affect buyers’ overall financial planning. The additional funds required for stamp duty may reduce the amount available for deposits, potentially influencing loan-to-value (LTV) ratios and mortgage terms.

Higher moving costs could also dampen the appetite to buy, as it becomes more expensive to move. This scenario may lead to homeowners staying put longer or choosing to renovate instead. Although stamp duty changes don’t directly impact interest rates, they can influence property prices and market dynamics.

The impending changes have created a sense of urgency among buyers aiming to complete transactions before the April 1 deadline. Missing this deadline could result in significantly higher stamp duty bills. For example, a couple purchasing a £488,500 house in St Albans could see their stamp duty increase from £3,175 to £9,425 if they are already in the process of purchasing and don’t complete by the deadline.

Effect on Deposit Requirements & Borrowing Power

While stamp duty changes don’t directly influence lender requirements, the increased upfront costs mean buyers need to budget more for their property purchases. This adjustment could affect the amount they can allocate toward deposits, potentially influencing their borrowing power and mortgage terms.
First-time buyers, in particular, may find it more challenging to save for both a sufficient deposit and the increased stamp duty costs, especially in regions with higher property prices. This financial strain could delay their entry into the property market or limit their purchasing options.
It’s advisable for buyers to consult with mortgage advisors to understand how these changes might affect their individual circumstances and explore any available government schemes designed to assist with home purchases.

Market Reactions: What Experts Are Saying About Stamp Duty 2025

The market reaction to the upcoming stamp duty changes is still unfolding, but industry professionals have shared early insights:

• Mortgage brokers: Mortgage brokers are witnessing a heighten ed sense of urgency among buyers striving to finalise transactions before the March 31, 2025, deadline. This rush is particularly pronounced among first-time buyers aiming to capitalise on the current higher thresholds before they decrease. Lenders such as Lloyds Banking Group have responded by setting internal deadlines to process mortgage completions, aiming to accommodate this surge in demand.
• Real estate analysts: Real estate analysts anticipate that the SDLT changes could lead to an initial spike in demand as buyers rush to complete purchases before the deadline, followed by a potential slowdown in market activity. This deceleration may result from buyers being priced out due to higher costs associated with the new stamp duty thresholds. The Royal Institution of Chartered Surveyors (RICS) has noted that the UK housing market appears to be losing momentum as the expiry of the temporary increase in stamp duty thresholds approaches, with concerns about inflationary pressures and geopolitical uncertainties also contributing to this trend.
• Financial advisors: Financial advisors are offering varied guidance to clients in light of the upcoming changes. Some advise accelerating purchasing decisions to benefit from the current SDLT thresholds, while others recommend a more cautious approach, suggesting that clients assess their financial situations comprehensively. The uncertainty surrounding future government policies and potential relief measures adds complexity to these decisions.

In summary, the forthcoming SDLT changes are prompting a flurry of activity in the housing market, with professionals across the industry providing varying perspectives on how best to navigate the current landscape. While it’s clear that significant shifts are expected, it’s still early days, and predicting the full impact remains difficult.

Key Takeaways & Next Steps

The 2025 stamp duty changes will increase costs for first-time buyers, home movers, and investors alike. While mortgage affordability isn’t directly impacted, the higher upfront expenses necessitate careful financial planning and may influence market dynamics.

Buyers should stay updated on SDLT changes, consult with mortgage advisors, and reassess their financial strategies to accommodate the new cost structures. Acting promptly before the April 1 deadline could result in significant savings, but those unable to do so should explore options to mitigate the impact of higher stamp duty costs.

Looking for mortgage advice on how the 2025 stamp duty changes might impact your home purchase? Contact us today for expert guidance.