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Hargreaves Lansdown: Property boom not over yet

Jessica Bird

September 14, 2021

house prices 2022

Following data from the Bank of England, which found that the amount lent in mortgages between April and June hit its highest point since 2007, Sarah Coles, personal finance analyst at Hargreaves Lansdown, said the property boom will continue even after the end of the stamp duty holiday.

Most of the transactions over this period were for house purchases by people who planned to live in the property (66.4%), and of this group, 24.7% were first-time buyers, up 6.5 percentage points from a year earlier and 2.8 points higher than the start of the year.

Coles said: “First-time buyer ‘FOMO’ helped fuel the rush for mortgages ahead of the stamp duty holiday deadline, pushing them higher than any time since the financial crisis.

“The fact that these buyers have less to gain from the stamp duty holiday itself demonstrates that the property boom isn’t over yet.”

Nevertheless, Coles pointed out that the boom will likely be tempered over the coming months.

She said: “Overall, mortgages agreed for the coming months fell slightly, so we expect sales to back off from record highs.

“However, they remain significantly higher than a year earlier, so we don’t expect the market to fall silent.

“In fact, first-time buyer statistics reveal real strength in the market. These buyers made up a higher proportion of mortgage borrowers than at any other time since the onset of the pandemic.

“They had far less to gain from the stamp duty holiday than everyone else. They are already exempt from stamp duty on properties worth less than £300,000, and on properties worth £300,000-£500,000, they only pay 5% on the property value over £300,000.

“Given that the average first time buyer property in March cost £214,452, most of them don’t have stamp duty to pay anyway.”

This, she explained, suggests that purchases are being driven by other market forces, which are less likely to abate after the tax incentive ends.

Coles said: “Rock bottom mortgage rates, and the fact some people were able to save more money during lockdown, made the move add up for more prospective buyers.

“FOMO played its part, as rising house prices convinced buyers to take the plunge before prices rose out of reach.

“And it helped that the prices of typical first homes, especially flats, have risen less than those for houses, as current owners have joined the race for space.

“Government guarantees for higher loan-to-value mortgages are also easing the pain slightly.

“Although only 2% of mortgages were for more than 90% of the purchase price, this was up slightly from the start of the year

“Further down the scale, things are getting easier: 39.6% of mortgages were for 75% or more of the purchase price, up 3.2 percentage points from a year earlier.”


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