A quarter of first-time buyers are unprepared for the cost of stamp duty

Almost a quarter (22%) of first-time buyers are not considering the cost of stamp duty before making an offer on their potential home, according to new research by TSB. Alarmingly, one in seven (14%) people buying their second or third homes do not consider stamp duty either.
 
Encouragingly, many first-time buyers (41%) and established homeowners (45%) are well-prepared having calculated the exact amount to set aside for stamp duty.
 
The research also shows that people’s level of consideration of stamp duty varies quite significantly across Britain. Residents in the East of England (50%), the south west (49%) and south east (48%) are stamp duty savviest, setting aside a specific amount to cover stamp duty. In contrast, one in four of those living in the north west (26%) and Wales (25%) are not considering the cost of stamp duty before making an offer on their potential home.
 
Stamp duty equivalent to almost a tenth of the average deposit
 
The research also found the average stamp duty outlay exceeds £5,000, the equivalent of nearly a tenth of the average deposit. For those looking to buy their first home, the average stamp duty is equivalent to an even larger proportion (15% of the average deposit).
 
In fact, it can be such a large cost that almost one in 10 (9%) homebuyers have capped their bid for a property in order to fall into a lower stamp duty bracket. The most likely to have done so are those living in London (12%) and the south east (13%), who also face the highest average house prices in the UK.
 
A third (31%) of current homeowners said they did not pay stamp duty. This is in stark contrast to those currently looking to buy their first property as the majority (86%) expect to pay stamp duty.
 
How to pay the price of stamp duty

Both first-time buyers (36%) and established homeowners (41%) are most likely to use their personal savings and investments to cover the cost of stamp duty.

This is closely followed by an extension on the mortgage amount which first-time buyers (21%) and homeowners (27%) alike consider a suitable option.

Unsurprisingly, cash gifts from family and friends are a significantly more popular option for first-time buyers (15%) than for established homeowners (4%).

Worryingly, one in ten (10%) first-time buyers turn to credit cards as a means of paying, whilst less than one in 30 (3%) established homeowners do so. Those intending to do so should carefully consider the impact this may have on their credit rating, and on the likelihood of their mortgage application being accepted.
 
Ian Ramsden, TSB’s Director of Mortgages, says: “With UK house prices rising, it should come as no surprise that the cost of stamp duty is on the up too. Yet, a worrying number of homebuyers are failing to factor this significant outlay into the overall cost of buying a home.
 
“With the expenditure on stamp duty equivalent to a tenth of the average deposit, it is important for potential homebuyers to factor it in to their purchase decision at an early stage. Before starting their house-hunt, people should talk to a qualified mortgage adviser to see what options are available to them. Buyers should kick start their search safe in the knowledge that they can afford the full costs of buying their dream home.”
 
TSB helps mortgage customers by paying stamp duty

TSB is currently offering to pay stamp duty for new mortgage customers whose home cost between £125,001 and £250,000 – saving them up to £2,500.

For a home worth less than £125,001 or more than £250,000, new TSB mortgage customers can receive £500 cashback, which will go some way towards the costs of buying a property such as surveying, stamp duty or removal fees.

In addition, customers can save even more money upfront with TSB’s mortgages, as many come without application or product fees.
 
More information on TSB Mortgages can be found on tsb.co.uk/mortgages.asp.