Prime market well poised to side-step the stamp duty fuelled market cliff edge

Research by the leading mortgage broker for global high-net-worths, Enness Global Mortgages, suggests that the market cliff-edge that approaches with the end of the stamp duty holiday is unlikely to impact the high-end section of the UK property market.

A downward correction in property prices and transaction levels was expected to follow the expiry of the stamp duty holiday at the end of last month, with early signs of this decline materialising via a drop in mortgage approval for the month of February. However, the Government’s decision to extend the stamp duty holiday to as far as September for some homebuyers has seen market activity once again pick up the pace, with any potential cliff edge now delayed.

Despite this delay, the analysis of buyer sentiment by Enness shows that the market fall will be felt far harder across the regular market, with high-end homebuyers and sellers likely to feel little, if any impact at all.

The research shows that 39% of recent home buyers with a household income up to £34,999 were motivated by the stamp duty holidays, as were 39% of home buyers with a household income of between £35,000-£69,999.

Just 16% of those with a household income between £70,000-£99,000 purchased as a result of the tax-saving, while just 6% of buyers with a household income of £100,000 or more were motivated by it.

While record-low interest rates have also helped boost the market from a buyer perspective, the same trend is clear. 80% of buyers earning up to £69,999 were motivated by low-interest rates, falling to 14% for those with a household income of £70,000-£99,999. Just 8% of those earning £100,000 or more said low-interest rates were a driving factor behind their decision to purchase.

Despite the Government’s latest announcement to back 95% mortgage products, there are signs that lenders are already reducing the range of products and the rates at which they’ll lend, particularly for those with uncertain incomes heavily reliant on commission, for example.

22% of recent homebuyers earning up to £34,999 stated they struggled to secure a mortgage with a good rate of interest, with 19% of those with a household income between £35,000-£69,999 also struggling.

However, just 4% of those earning between £70,000-£90,999 struggled, with a further 4% earning £100,000,000 also finding it hard. 

CEO of Enness Global Mortgages, Islay Robinson, commented:

“We’re currently seeing a very hot market driven by positive buyer sentiment, sentiment that has been fuelled by the low cost of borrowing and the additional saving in the form of a stamp duty holiday.

However, we’re already seeing some lenders start to reign in their lending and tighten their criteria which is proving problematic for homebuyers in the lower price tiers of the market. While a stamp duty reprieve is enabling many of these buyers to boost their deposit savings pot in order to secure a mortgage, it suggests that the approaching cliff edge is going to be far steeper across these lower price thresholds when it does hit.

In contrast, the high-end market has been building a slow but steady head of steam in recent months. While the stamp duty holiday has certainly been a nice saving to make, it has been far from the driving factor. Of course, those transacting at these higher price points are also much better placed when it comes to arranging finance and this isn’t dependent on interest rates remaining at record lows.

As a result, while there is a very real chance the general market could derail come the end of the stamp duty holiday, this is unlikely to be the case for the high-end market and we expect this more natural return to form to continue far beyond September.”

Survey of 1,081 recent UK homebuyers (last 6 months) carried out by Enness Global on 1st April 2021 via Find Out Now