Labours plan to scrap stamp duty for first time buyers

sparks11

audigex wrote: »

You may notice if you're a FTB in the £250-300k range and can save £3-5k, but a FTB doesn't strike me as likely to be spending £250-300k outside of London and a few other specific areas.

Frankly I think it's pointless

I'm a FTB in the North East. Our max was £250K. My circle of friends are all in similar situations to us. So FTBs spending £250-300K is a reality.

Saving £1600 to me isn't pointless. It's money I can spend elsewhere rather than giving it to the government. I don't understand what you were saying about not saving very much up front unless people usually add it to the mortgage. But we're not, so an extra £1600 at the most expensive time of our lives would be a huge deal to us.

audigex

I'm not saying it's entirely pointless, I'm saying the way it's marketed as "helping" FTBs is nonsense: most people don't pay stamp duty up front, they add it to their mortgage.

For the most part FTBs need help to reduce the amount they need up front, not the capital. If they paid £1600 stamp duty up front then yes they may benefit, but the majority can't do that.

You "Save" £1600 - but you really only save £160 (assuming a typical 10% deposit) in cash, and then £1440 at a rate of £4 a month over 25 years.

I'll never turn down free money, but the idea that's it's being marketed as helping FTBs afford their first purchase is an absolute nonsense. If you'd required £160 more up front and £1440 paid over your mortgage, would it have stopped you buying? Even assuming the vendor didn't just bump their price slightly.

You presumably had a mortgage of somewhere between £12.5-25k (5-10%) on a mortgage of £225-237.5k, if you're typical of a FTB.

Let's assume 10% for the sake of argument, so you had a £25k deposit on a £225k mortgage

Would it REALLY have made a difference to you if you'd "only" required a £24,840 deposit instead of £25,000? And if your mortgage had "only" been £223,560, instead of £225,000?

Yes it's an extra £1600, but in reality it's £160 off your deposit and £1440 off your mortgage. Or £5 a month and £160 off your deposit.

dan7hughes

When you talk about deposits you presumably mean lending to property value.

Which doesn't look at stamp duty. So to achieve 90% LTV on a 250k house you'd need a 25k deposit regardless of stamp duty.

If the 225k you are borrowing just happens to pay the balance on the house and stamp duty..... then you suddenly don't need to pay £1600:
you can still borrow the 225k and become £1600 better off now to spend on something else on the house.
or borrow 223,400 and pay less longer term.

audigex

You borrow £223,400, which works out as a £5 reduction per week.

The point I'm making isn't that a free £1600 is a bad idea, it's that Labour is marketing this as "Look, we're helping people get onto the property ladder!" which is just untrue

As you so succinctly point out: you can still borrow the £225k for that house... if you could afford to borrow £225k in the first place.

This does nothing to address the issue Labour are trying to claim it addresses: the difficult many FTBs have in buying and financing a house.

Nobody is arguing that a free £1000-5000 is a bad thing, I'm arguing that it provides no real immediate benefits because it changes the house price by <0.3%. Unless you JUST missed out on the mortgage as a borderline case, nobody will be buying a house because of this policy, where they couldn't buy one before.

This policy doesn't help prospective FTBs become actual FTBs, it just gives already actual FTBs a slight (but welcome) discount that's my point.

A nice policy, but the way it's being marketed as "helping young people buy their first home" is utter nonsense.

jjlandlord

sparks11 wrote: »

Saving £1600 to me isn't pointless. It's money I can spend elsewhere rather than giving it to the government.

Well, obviously...

The point is that this will not change anything re. you being able to buy or not at all.
Still, assuming it does then it means that it will put further pressure on the market and thus increase prizes.
It could also mean that you are now able to offer £1600 much for the same property and thus also increase prizes.

Therefore it is an un-necessary subsidy that will make matters worse.

Conclusion: Bad idea.

So close to polling day it is obvious that this an un-responsible announcement aimed at getting a few extra votes.