Exclusive: Pensioners should get stamp duty break if they downsize home, house-buyers’ group says
To ease the housing crisis, pensioners may be pushed into downsizing their homes and getting a tax break on stamp duty in return.
The National Association of Property Buyers (NAPB) said the incentive would free up supply of housing and cool house prices, while also redoing the need for equity release.
This comes after the NAPB called on Rishi Sunak and Liz Truss, the two remaining Conservative leadership candidates, to make solving the housing crisis a key priority if they’re elected.
A spokesperson for the group said an option would be to give a stamp duty cut for pensioners, if they chose to downsize.
“It would allow them to move without the penalty of high SDLT and would certainly encourage more to do so”, Jonathan Rolande, a spokesman for the NAPB.
“Currently a pensioner selling a family home at £700,000 to buy at £500,000 would face a £15,000 stamp duty bill and with other costs such as estate agent and solicitors a move downward is going to cost them nearly £30,000.
“This is a figure many simply cannot bring themselves to pay when leaving a much loved family home. Government receipts from stamp duty have more than doubled in the last ten years so there is certainly capacity to offer targeted reductions to help free up stock.”
The organisation also said a cut in stamp duty would make it less likely pensioners would use equity release, whereby you can access cash tied up in your home.
While those using it had not returned to pre-pandemic levels according to the Equity Release Council, the average loan size had grown six [er cent in the last year, with more than 150,000 people using the product.
Equity release comes with significant risks, and can be more expensive than taking out a mortgage.
Last week, the NAPB urged Truss and Sunak to put tackling the housing crisis at the “top of their list ion they were to become the Prime Minister” , saying in a statement it “heard very little” from either about what they’d do.
“This is deeply alarming because right now a whole generation of young people are facing the reality of not being able to rent a property let alone own one.”
Liz Truss and Rishi Sunak campaign teams have been approached for comment.
Rolande, who is also the co-founder of House Buy Fast, said there were “significant drawbacks” of equity release, especially amid rising interest rates.
“Average interest rates on lifetime mortgages are approximately four per cent, with the lowest rates nearer to three per cent. Interest is also due on the debt and by opting not to make voluntary payments to reduce the debt, the interest compounds.”
“Several fees will also be payable in addition to the interest. Lifetime mortgages are intended to last the homeowner’s lifetime and so selling the property with an equity release plan can be eye-watering in terms of cost. Not only will the debt need to be repaid, but early repayment costs will also be incurred which can be considerable.”
It should “always be a last resort move.”
HM Treasury spokesperson said: “Thanks to our reforms, nearly six out of ten house sales pay less than £2,500 in stamp duty and we have cut the tax for 98 per cent of properties worth under £937,500.
“The majority of homeowners downsizing are likely to have equity in their current property and are fully exempt from paying Capital Gains Tax on any gain made on their main residence, whilst the stamp duty due when they move in to a new property is small and usually lower than estate agent’s fees.”