People told to start application process in November before stamp duty ends
Potential homebuyers have been urged to start their homebuying journey at the beginning of November if they want to buy before the stamp duty holiday expires.
The recommendation, from Legal & General Mortgage Club, highlights the serious waiting times facing homeowners in the current climate.
The stamp duty holiday runs until the end of March, so from the start of November there’ll still be nearly five months before the holiday ends.
The stamp duty holiday enables people to save up to £15,000 by raising the threshold from which the tax is paid from £125,000 to £500,000.
Seeing as the saving impacts higher value properties, that’s resulted in a number of wealthier buyers in particular looking to buy – including buy-to-let investors and owner-occupiers looking to trade up.
Housing journey time
After consulting with advisers, conveyancers, estate agents and housebuilders, L&G Mortgage Club estimated that the average homebuying timeline is currently 15 to 17 weeks.
And given that a second lockdown looks likely, L&G advised buyers to give themselves some breathing room on top of that.
Before the pandemic, a mortgage application for a consumer with straightforward circumstances took less than two weeks (61%) to go to mortgage offer.
However, a third (30%) of advisers reckon it’s now taking three to four weeks, with a similar proportion (32%) saying it’s taking four to eight weeks.
Conveyancers indicated that the time between offer and exchange is now three weeks, while the period between exchange and completion stands at one to two weeks.
What’s causing the delays?
As we’ve discussed before, the mortgage market is currently running well below its usual speed at the moment.
Why? Well lenders are blaming Covid-19 for upping the complexity of assessing people’s income, especially when people have claimed government support and are worrying about the status of their employment.
This is reflected by L&G’s study, which found that those who have been on furlough, have complex backgrounds or impaired credit histories need to allow up to six to eight weeks (28%) to get approved for a mortgage.
The pandemic also means some companies have reduced staff, many of which are working remotely, both of which will slow things down.
It can also be tricky for surveyors to inspect properties in the current climate, as they typically need to inspect properties in person. This can be tough to arrange if they’re occupied due to the pandemic, especially if it’s a buy-to-let with tenants inside.
L&G’s message to the government
L&G sent an interesting message to the government after publishing the research.
Kevin Roberts, director, Legal & General Mortgage Club, said: “As homebuyers rush to take advantage of the stamp duty holiday, policy makers need to consider if a tapering of the stamp duty deadline is needed instead of a hard deadline.
“We need to avoid those moving or purchasing a home missing out through delays after 31 March when the holiday ends.”
It seems the government should think ahead regarding the end of the stamp duty holiday – and L&G is an influential enough company that such a comment could get the ball rolling when it comes to eliminating a hard deadline.
As the rules stand, it seems delays could cost people thousands of pounds, potentially causing transactions to break down, so creating something of a soft deadline could be a sensible move.
Regardless of what happens, it makes sense for buyers to get ahead if they want to buy, just in case they miss out due to the delays the market is experiencing.