First time buyers use stamp duty savings to cut mortgage costs

30th April 2018

Low mortgage rates, high levels of employment and government schemes, such as Help to Buy, are all helping first-time buyers enter the housing market.

The recent abolition of Stamp Duty for a majority of first-time buyers looks set to provide additional help by reducing the upfront costs associated with making a first home purchase.


Except in Scotland, Stamp Duty was abolished last November for first-time buyers on homes worth up to £300,000. Particularly to help those buying in very high-priced areas such as London, a stamp-duty exemption is in place on the first £300,000 purchase price on properties valued up to £500,000; the additional amount up to £200,000 will incur 5% duty.

From April this year, property Stamp Duty matters in Wales will, as in Scotland, be devolved. The above concession will then cease to apply in Wales, but the new Land Transaction Tax there will have a £180,000 threshold for all purchases, not just those of first-time buyers. The Scottish Government has proposed a higher £175,000 (from £145,000) Land and Buildings Transaction Tax threshold for firsttime purchases as from 2018-19.

The government’s decision in November has had a mixed reception. Many believe that it won’t have a material impact, and some have warned that it will drive up house prices, leading to first-timers paying more for their houses than they are likely to save. A spokesman from the Number 10 press office defended the change in Stamp Duty, claiming in early January that 16,000 first-time buyers had already made a saving of up to £5,000 as a result of the cut, and estimated that more than 1m more would stand to benefit over the next five years. They also said that 80% of all firsttime buyers will pay no Stamp Duty under the rule change.

Those purchasing a £300,000 property are set to save the most, benefiting by £5,000. First-time buyers of more costly homes up to £500,000 see their Stamp Duty lowered by £5,000. However, there are also substantial worthwhile savings to be made on less expensive homes. Purchasing a property worth £208,000, the average price paid by a first-time buyer, would previously have given rise to a Stamp Duty payment of £1,660, but a first-time buyer will now be able to save this amount.


Some commentators have been quick to point out that the move doesn’t tackle the major issue which is the UK’s chronic housing shortage. The government has announced a series of measures designed to fix what they see as “the broken housing market”, and freely admits that at least 300,000 new homes are needed every year to keep pace with demand.


As a mortgage is secured against your home or property, it could be repossessed if you do not keep up mortgage repayments.