Mortgage costs rise 7.7% as first-time buyers face risk of extra £6k stamp duty bill
Household spending on mortgages and rent increased by 7.7% year-on-year in February as homeowners remortgaged from cheap fixed deals onto higher rates.
At the same time, first-time buyers are racing to get their purchase complete before the end of March when stamp duty thresholds drop, increasing the amount of land tax they will be required to pay.
Facing a bill of more than £6,000 should they miss the deadline, 12% of those in the process of purchasing a home said they will pull out.
Stamp duty deadline causes surge in activity
The reversion of stamp duty thresholds, which will fall back to levels last seen in 2022, has driven up average monthly mortgage completions by 26% since the Autumn Budget, according to data from Barclays’ Property Insights report.
This increase in monthly completions is largely driven by a 59% surge in first-time buyer purchases.
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Those on track to miss the looming deadline in England and Northern Ireland expect to spend an extra £6,512 on average for their purchase.
From 1 April, the nil-rate threshold for stamp duty will fall from £250,000 to £125,000 for residential purchases and from £425,000 to £300,000 for first-time buyers.
The thresholds were raised to their current levels in September 2022, badged as a permanent change, but this was amended just two months later in the Autumn Statement, when a deadline of 31 March 2025 was placed on the increase.
It was hoped that Chancellor Rachel Reeves would extend the deadline in her incoming Budget – but no announcements were made.
Confidence in housing market grows
The increase in mortgage and rent costs and upcoming changes to stamp duty are causing concern for buyers, said the bank, although renters are still taking steps to accelerate their homeownership goals.
Despite the upcoming tax changes, confidence in the UK housing market has grown to 30%, its highest level since October 2024, up from 24% in January in England and Northern Ireland.
However, some worries persist, as consumers reported the highest level of concern around inflation (88%) and interest rates (64%) since September 2023.
Demand for higher-value properties wanes
Changes to the stamp duty bands are also limiting the choice of property stock available to first timers.
Barclays data shows that demand for homes above the current stamp duty threshold of £425,000 has steadily declined each month, with completions in this bracket dropping from 21% in October 2024 to 16% in February 2025.
Buyers threaten to pull out
Among those with a purchase in progress, nearly one in eight say they will pull out if they do not complete before the end of March.
Meanwhile, a fifth of prospective movers say they will now look to buy a smaller property to mitigate costs, with 18% changing the location of their search to a more affordable area.
Meanwhile, Barclays’ proprietary data revealed that the average age of a first-time buyer in the UK rose to nearly 34 in 2024, up from 32 only two years earlier, as homeownership becomes more challenging.
Sian McIntyre, managing director of mortgages and savings at Barclays, said: “Our latest data indicates that prospective buyers are adapting their behaviour to get ahead of some of the volatility in the market.
“Encouragingly, amidst rising house prices, uncertainty around interest rates, and the upcoming changes to stamp duty, consumer confidence in the housing market is staying the course.”
