The leading trade bodies representing lenders and intermediaries in the mortgage market have both warned that the home buying market is reaching a critical stage and it is now likely that many cases will not complete before the stamp duty holiday deadline of 31 March.

IMLA, which represents 43 UK mortgage lenders, and AMI, the trade body representing the views and interests of mortgage intermediaries, said the market was congested due to the pressure caused by the significant surge in purchase transactions from July onwards.

Those buying properties for less than £500,000 will pay no stamp duty if they complete in time. If they miss the date, however, they will be liable to pay the tax on the value of the property above £125,000 (the threshold for first-time buyers is £300,000).

Melanie Spencer MCI Club

DPR Group joins IMLA as associate member

The market has processed record levels of new applications from buyers whilst managing the varied and continuing impacts of COVID-19 on their businesses. Once mortgage offers are issued and borrowers move on to try to achieve exchange and eventually completion, the pressure moves on to conveyancers, who are also facing record volumes of business.

IMLA and AMI have raised their concerns that a large number of borrowers may not be able to meet the March deadline, through no fault of their own, with the Treasury. Both are concerned that the tax exemption cut-off with no taper could see a widespread collapse in property chains if buyers who planned to take advantage of the stamp duty holiday have not completed before 1 April 2021 and are forced to withdraw.

Kate Davies, executive director, IMLA , said: “Unprecedented demand continues to put immense pressure on lenders, intermediaries and conveyancers, who are all working exceptionally hard to battle through the capacity challenges they face. In addition to the myriad operational challenges posed by the pandemic, the incentive to beat the stamp duty holiday deadline is increasing volumes of business.

“We are concerned, as we approach the stamp duty holiday deadline, that borrowers need to be realistic about what will happen if they miss the 31 March cut-off date. Those who do miss it will need to be aware of how much stamp duty they may be liable to pay – and have a plan for finding that cash.

“If they can’t – there is a risk that their sale may fall through – taking with it a number of other transactions if there is a chain. Lenders, intermediaries and conveyancers will be as upfront as possible with borrowers and manage their expectations, but it is also vital that borrowers plan ahead and ensure they have the necessary funds in place.

“We are asking all our members to work to increase post-offer operational support, and our broker and conveyancer partners to assess their new business pipelines. This will ensure as many complete before any deadline.

“We want to avoid borrowers losing out – through no fault of their own – and have called for some flexibility to the deadline which would ease the immediate pressure on lenders and conveyancers, and treat borrowers whose cases are already in the pipeline more fairly. One way of doing this would be to taper the withdrawal of the tax exemption rather than apply a hard stop on 31 March. “

Robert Sinclair, chief executive of AMI, added: “As the main contact point for the consumer at the sharp end of this, brokers will work hard to keep the consumer informed and warn them of the potential risks they face. We are calling on lenders to ensure that their conveyancer partners have capacity to deal with the pipeline in front of them.

“I would like all lenders, brokers and conveyancers to assess their pipelines and operational capacity between now and the end of March and give a realistic assessment to their customers of the likely outcomes.

“By working together now we can minimise disappointment. However, I firmly believe with what is already in the legal process, government needs to stand ready to extend the deadline to avoid there being thousands of frustrated and disappointed taxpayers.”