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Mortgage Famines and Stamp Duty Holidays – Between the Lines

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United Kingdom  LTV  Stamp Duty  Council of Mortgage Lenders  Ian Cowie  Pol Pot  Mortgage Famine  Stamp Duty Holiday 

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Mortgage Famines and Stamp Duty Holidays – Between the Lines

Having almost reached the point of blocking anything to do with news about Buy to Let lending and how rental prices are going to the moon, it would appear the trend in what the press thinks we need to read about the property market is changing.

Last week it's been about holidays and famine apparently, according to the Telegraphs' Ian Cowie.

The Stamp Duty holiday for first-time buyers is coming to an end in the UK. At the end of the month, properties up to 250,000 Pounds will once again be subject to a 1% charge. This in itself has spawned the other side of the main points this week – how to beat the mortgage famine.

The point that "holiday" and "famine" are hardly appropriate words for the subjects to hand is just the start of why journalism like this is not doing the property market any favours.

For example, if I go on "holiday", I can assure you I am looking for a darn sight more than an additional 1% of fun or relaxation over my normal day-to-day life.

With respect to "famine" perhaps it's just me, but it is usually taken to mean the widespread scarcity of something at any cost, not something that is just difficult to come by. If it were, I could easily say there is a "post-it note famine" in the office and write about that – only to discover that if I actually look hard enough, and can justify using them responsibly I can get some post-it notes if I really need to without having to overthrow Pol Pot in the process.

With respect to Mr Cowie and his collection of mortgage providers (all gaggling for a mention on how great their products are), making the point that "the tax tail should not be allowed to wag the investment dog – in other words, you should not pay an excessive price just to beat a tax deadline" is all well and good, but then the article goes on to highlight how to get the highest LTV possible!

Whilst for the aspiring first-time buyer this might initially seem helpful, at no point does the article take a step back and actually consider what it is saying or suggesting.

A simple example

I see a house for sale on the threshold of the Stamp Duty "holiday" limit and for some reason or another I think to myself "ooh I could save 2,500 pounds if I buy before the end of the month". I won’t deny that two and half grand goes a long way – a handsome saving to make.

The point is though, if I can't get a mortgage at a level I can afford, or at a level of risk that a responsible lending entity is prepared to take, I am not actually saving anything at all. Even if I can get a high LTV mortgage, I am paying through the nose on the interest rates – a point only highlighted by Savills' Lucian Cook.

On top of this, little mention is made about the inevitable rise in interest rates – yes, they have been at ground level for some time now, but they will rise sooner or later. When they do, the next "news of the week" will be repossessions. Even if, using the example above, I were to stretch my financial limits to beat the Stamp Duty headline, and take a risk that interest rates won't rise in the next few months, when they do rise I will undoubtedly be up the proverbial creek without a paddle.

Reading between the lines

According to the Council of Mortgage Lenders "There were 18,700 loans advanced, worth £2.3 billion, up 7% by volume and 10% by value, from November. There was also an increase in the proportion of properties (from 50% to 53%) bought by first-time buyers within the price band currently exempt from Stamp Duty, making it likely they are beginning to rush through purchases before the concession ends in March."

According to Mr Cowie, on the figures from the CML and the number of people taking on mortgages in the sub 250k price bracket "figures show that thousands are already doing so"

After wheeling out my trusty abacus, I find that 7% of 18,700 is only 1309 – not "thousands" - and the 3% increase in the number of first-time buyers in this bracket isn't much to write home about either, particularly when you take into account the overall number of first-time buyer loans across all prices is down – 4% by volume and 2% by value.

The property industry in general has never really had a good name through the years. Much of the time quite rightly so, however, when you consider the reasons behind why the property markets are in the state they are when journalists publish the juicy bits and wrap them up in fanciful headlines just to grab some readers.

If the headlines, statistics and media opinion all matched it wouldn't be so bad but when banks publish reports based on "averages" that only cover parts of the market, and every news outlet has a differing opinion on whether house prices have gone up or down depending on which report they read (rather than some factual data from the land registry) – is it any wonder the UK housing market and the economy is in the state it is?


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