How Yorkshire Building Society expects stamp duty changes to impact region's housing market

We’re predicting there will have been 330,000 first-time buyer mortgage transactions during 2024, up from 290,000 in 2023.

This is positive, but first-time buyers still need help. This year we’ll be taking forward the recommendations in our policy paper, Home Improvements – Building an Integrated Strategy for UK Housing. It set out a range of solutions to fix the housing market, especially for those trying to get on the ladder.

Last year, buying a home became more affordable because of falls in the Bank of England base rate and positive real earnings growth, but it’s still a big stretch for many.

In Yorkshire, the average house costs £217,146, which is more than six times the average regional income of £34,401.

Higher costs for house buyers are on the horizon with stamp duty set to increase on April 1.

In the Budget in October, the Government announced it would not extend the temporary increase in stamp duty thresholds. This means you’ll pay the tax if the house you’re buying costs more than £125,000, instead of £250,000 – costing the average Yorkshire buyer around £2,000.

First-time buyers currently pay no stamp duty on homes up to £425,000, but this will drop to £300,000.

With the average first home in Yorkshire costing around £200,000, most will stay under the stamp duty threshold. But the tax will have greater impact in parts of the region where buying a home is more costly. In York, for example, the average property costs £317,137, pricey compared to Hull (average price £144,918) or Barnsley (£171,191).

From April, some first-time buyers will not only have to save up money for a deposit – which we know from our research is already a problem – but they will have to find extra for the tax bill too.

First-time buyers in Yorkshire already face a huge challenge in raising enough money to buy a house. On average in 2023 they paid a deposit of more than £30,000, though since we launched our game-changing £5k Deposit Mortgage last year it’s possible to secure a mortgage with just £5,000 in the bank.

In 2024, boosted by base rate cuts, we saw house buying increase by 10 per cent. This year the market is expecting three base rate cuts, but we’re not likely to see average mortgage rates fall much below 4 per cent.

Looking at prospects for the market in 2025, a lot of variables are at play.

We can expect a busy start to the year, as buyers rush to complete before stamp duty changes.

Economic factors like real earnings growth, a higher minimum wage and low unemployment are all helping increase confidence.

But that could be dampened by stamp duty – buyers will face extra costs and more owners may opt to stay put. If ‘second steppers’ do that, it would reduce the supply of first homes and could increase their price.

Tom Simpson is Interim Chief Commercial Officer at Yorkshire Building Society