TSB has launched a headline-grabbing offer in which the newly rebooted bank will pay for the stamp duty of first-time buyers, up to the value of £2,000.
In essence, it's a cashback scheme. It certainly isn’t unique in the marketplace – Yorkshire Building Society offers a cashback deal, but will only pay out up to £1,000, for instance.
With the mortgage market heating up, will other stamp duty-covering deals follow in its wake? Well, it seems that buyers shouldn’t necessarily get their hopes up, going on past experience.
“It’s something which was tried by Halifax in April last year,” says James Cotton, mortgage expert at London & Country. “So it’s not totally revolutionary. There was an expectation that others would follow, but it never really happened.”
However, there are currently other deals on the marketplace which offer help with associated home-buying costs like legal fees. But prospective homeowners would do well to look past the incentive and carefully examine the rates and fees which come with the mortgage. After all, there really is no such thing as money for nothing, and mortgage deals with cashback elements frequently come with higher rates. Better rates without cashback may welll be available elsewhere.
“Cashback or incentive offers will always be priced into the deal,” says James Cotton. “If the numbers stack up, then they may be worth looking at – after all, any extra help is always welcome when buying a house.”
What is stamp duty, anyway?
Stamp duty is a tax on property transactions, linked to a home’s value. It's paid by the buying party.
For properties valued between £125,000 and £250,000, stamp duty is set at 1%. It might not seem like much, but at the very bottom of the threshold it will cost buyers an additional £1,250 on top of their deposit.
Add this to legal and arrangement fees, paying surveyors, buying furniture and the other associated costs of buying a house, and you’ve got a recipe for seriously skint first-time buyers. In fact, it’s often enough to put some people off buying a home altogether.
In attempt to kick-start the housing market back into life, the previous government introduced a ‘stamp duty holiday’ for first-time buyers in 2009, which came to an end in 2012. Its conclusion hasn’t deterred too many people, though – the Council of Mortgage Lenders reported that first-time buyers were up on the year before in 2013.Your home may be repossessed if you do not keep up repayments on your mortgage or any other loan secured on it.