The impact of the Stamp Duty Changes on borrowers and lenders
The upcoming changes to Stamp Duty Land Tax (SDLT) in England and Northern Ireland, set to take effect from April 2025, are poised to significantly impact the housing market, affecting both first-time buyers and existing homeowners.
According to recent research from Zoopla, these changes will increase the cost of buying a home for the majority of purchasers, with four in five homeowners now expected to pay SDLT, up from just under half prior to this deadline. As the stamp duty relief introduced in the 2022 mini-budget comes to an end, it’s crucial for lenders to remain proactive in providing responsible mortgage options to mitigate this additional financial burden on buyers, especially in the higher loan-to-value (LTV) segments.
A surge in stamp duty costs and its implications
From April, the reintroduction of the 2% SDLT rate for purchases between £125,000 and £250,000 will increase the financial commitment for buyers across the board. Zoopla estimates that these changes will raise an additional £1.1bn in SDLT revenue annually. The proportion of first-time buyers required to pay SDLT will double to 42%, , hitting London and South East buyers in the £300,000 and £625,000 range the hardest.
With SDLT adding up to £15,000 in additional costs for some buyers, affordability will become an even more pressing issue for borrowers, particularly for FTB’s and those with less equity in their existing properties. This increase in upfront expenses could even push many borrowers into a higher LTV bracket. For example, a first-time buyer purchasing a £500,000 property will see SDLT rise from £3,750 to £10,000, making it harder to maintain a lower LTV ratio and potentially leading to higher borrowing costs.
Balancing Risk and Support for First-Time Buyers and Second Steppers
On a positive note, the latest Moneyfacts UK Mortgage Trends Treasury Report charts an encouraging trend in the number of available high LTV mortgage deals, with 95% LTV products rising to 388 as of February 2025. However, these deals still represent only 6% of the market, highlighting the need for further support from lenders to ensure sustainable homeownership.
As affordability pressures and average wages continue to outpace inflation, with pay packets rising for both the public and private sector workers, lenders must find a balance between responsible lending and ensuring access to the market for this key buyer group. Expanding the availability of competitive high LTV mortgages, reducing upfront fees where possible, offering tailored affordability assessments, and common sense underwriting approaches will all prove key factors in improving accessibility, supporting first-time buyers, and ensuring a sustainable housing market moving forward.
Additionally, lenders can support buyers through specialised mortgage products such as Shared Ownership, Joint Borrower Sole Proprietor, and intergenerational lending options, which help supplement deposits and manage monthly repayments more effectively. Government schemes also play a crucial role in making homeownership more attainable despite rising upfront costs.
By offering first-time buyers and second steppers competitive, well-structured mortgage products alongside expert guidance from intermediaries—where the value of advice continues to grow—the industry can help mitigate the impact of SDLT changes and contribute to a stable housing market for all stakeholders.
David Lownds, Head of Sales, Marketing & Business Development at Hanley Economic Building Society
