The great Stamp Duty and negative interest rate debates.
As we enter lockdown week #whatever, you may start to feel that your meetings resemble that of the now infamous Handforth Parish Council, but some welcome relief has come in a dusting of snow and not having to handle the usual commute/inevitable transport breakdown that normally ensues. There are some upsides to being stuck at home…
There was another element of this Groundhog Day environment as two debates just refuse to go away – Negative Interest Rates & Stamp Duty, so that is what I will focus on this week.
Stamp Duty Debate
After 100,000+ people signed a petition, the possibility of some form of extension to the current Stamp Duty holiday was debated in parliament.
There was cross party support to do ‘something’, but then nothing unanimous in what that something should be. Front running ideas were:
- Extend the Stamp Duty holiday by 6 months
- Anyone with a mortgage offer dated prior to the 31st March should get the discount no matter when they complete
- Make the £500k threshold permanent
Of the above ideas, it is the first that is most likely. The second will be quite difficult to manage for many reasons and the 3rd is just a pie in the sky idea from Labour (I saw figures recently that the removal of Stamp Duty to £500k has cost HMRC over £1.6B in revenue and as a country, we simply can’t afford to waive that way in the current climate. It would be nice to see this though as Stamp Duty was originally introduced as a tax on the rich, but as with all taxes, over time becomes standard for everyone…)
A decision will be made in the budget on 3rd March. Mr Sunak will be well aware of this and will have to balance off that classic thing that a Chancellor has to do – is the loss of revenue offset enough by the wider market stimulus? – we wait to see.
It is not just the weather that has gone sub zero, last week the Negative Interest Rate debate came back with a vengeance.
While the MPC (Monetary Policy Committee) voted unanimously to keep the Bank of England benchmark rate at 0.1%, it was comments from the meeting that made the headlines, as they also requested that lenders be ready to implement sub-zero rates within 6 months. This triggered a lot of speculation that this move could be made to further stimulate a bounce that is expected from the vaccine roll out.
All LIBOR rates have remained in positive territory, so there doesn’t seem to be an economic argument to do this just yet, but as the debate just refuses to go away, we will keep a close eye on how it develops.
Market Rates all up last week which has been the trend over the last few months for longer term rates (5 years). Just looking at the numbers there isn’t an arguement for UK rates to go to zero or lower, but with the outlook so uncertain, it’s one to keep a close eye on.
That said, lenders are offering rates at quite a high margin over market rates, (especially where there is a 25% deposit or less) so we still feel keeping your mortgage options short term will save you the money in the long run.
In the last week:
3 Month Sterling Libor = up by 0.003% at 0.040%
2 Year SWAP = up by 0.034% to 0.116%
5 Year SWAP = up by 0.068% to 0.318%
Bank of England Base Rate = Held at 0.10%
2 Year Variable from 1.19%
2 Year Fixed Rates from 1.04%
5 Year Fixed Rates from 1.24%
BTL Rates from 1.19%
The actual rate you will be offered will be dependent on your personal circumstance and deposit level. Please speak to one of our advisers so that they can guide you through this process
Source: Twenty7Tec February 2021
If you have any questions on the points raised here on the Stamp Duty and negative interest rate debates or any mortgage goal that you may have, please do pick up with one of the team who would be delighted to help.