There is good news being reported that TSB is offering to pay the stamp duty for mortgage customers purchasing a home up to £250,000.
TSB research shows 40,000 homebuyers spent £70m in stamp duty in January last year. The Council of Mortgage Lenders is predicting stamp duty costs are set to escalate by five times in 2020.
The TSB study shows the average stamp duty payment is £1,650 and one in10 aspiring homeowners worry about whether they can afford the tax.
The offer is available on a select range of tracker and fixed rate deals up to five years and could save borrowers up to £2,500.
The lender will also offer £500 cash back to customers exempt from the stamp duty levy, as well as those whose property purchase price is above £250,000.
How does Stamp Duty work?
Our advisers deal with clients every day and Stamp Duty can be one of the most expensive bugbears because of its structure. It comes in slab form so the payment must be made up front, in full and straight to the taxman.
The tax is applicable in stages starting at £125,001 so homes worth less are exempt from payments.
If your property is worth £125,001 you must pay 1 per cent stamp duty on the whole price - £1,250 – but if your property is worth £125,000 you pay nothing.
Stamp duty increases with the value of the property so if your property is worth between £250,001 and £500,000 you pay 3 per cent on the whole amount.
It then jumps to 4 per cent between £500,001 and £1m, 5 per cent from £1m to £2m and 7 per cent above £2m. The most expensive band was only introduced last year as part of a Government plan to crackdown on tax avoidance and tax the wealthy more.
The figures can be truly mindboggling with a buyer paying £140,000 in up front tax when buying a £2m home.
It is clear it could have a major frictional impact on home purchases and acts as a massive source of revenue for the Government.
We were surprised to note that 50 per cent of all Stamp Duty raise is paid on London homes while a whopping 14 per cent of national Stamp Duty income comes from just one borough – Kensington & Chelsea.
With such high Government revenues it is easy to see why ministers have a vested interest in seeing house prices rise.
Can it change?
Despite the high revenues we would like to see reform of Stamp Duty to make it fairer.
In recent years there have been Stamp Duty holidays for first-time buyers up to £250,000. This allows first-timers to focus on raising the ever higher deposits needed and not on paying thousands in tax to the public pot.
The current Government does not seem too keen on the idea since it was stopped in 2011.
In the absence of cuts to Stamp Duty we are delighted to see the likes of TSB offering this kind of deal. It shows lenders can be innovative and offer a different perspective for borrowers.
We deal with all types of cases from first-time buyers to pensioner mortgages and we know what is available.
Our experts scour the market daily to get the most appropriate deal for our clients.
We can advise you on Stamp Duty bands including which lenders will offer help or whether a Stamp Duty holiday is on the cards.
With such a big cost it is important to know where you stand and how you can save through your mortgage or when you buy.