House price growth could be slower than expected next year thanks to an increase in stamp dutysay the experts.

Chancellor Rachel Reeves announced in the Budget in October, second home buyers, landlords and businesses will pay a higher rate on additional properties, while the threshold below which first-time buyers are exempt from stamp duty will also be reduced.

Experts now say that although house prices are expected to rise across the UK in 2025, changes to stamp duty could cause growth to slow more than expected as some first-time buyers struggle to pay higher property prices.

And experts also said mortgage costs for first-time buyers may need to fall to allow more people to buy homes.

How will the stamp duty changes work?

You must pay stamp duty (or stamp duty, property tax) if you buy a property or land at a certain price in England or Northern Ireland and the amount you pay depends on various factors such as cost and whether you own another property.

You don’t need to pay if you’re buying a house worth less than £250,000, or if you’re a first-time buyer and the value is less than £425,00, but from April the threshold for the first time buyer is the time to purchase is expected to be reduced to £300,000 in March 2025. Those buying second homes pay an additional rate of stamp duty, and this has passed from 3 percent to 5 percent at the end of last year. month.

What impact could these changes have on property prices?

Aneisha Beveridge, head of research at the Hamptons, said the real estate agent had planned real estate prices would rise by 3% in 2025, but she estimates that rising stamp duty costs could be a drag in some areas as first-time buyers will have to scrape together more cash.

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“First-time buyers paying between the new and old nil rate bands (£300,000 and £425,000) are likely to be hit hardest by the tax rise. Assuming the money comes from their deposit, for every £1,000 paid in stamp duty, a buyer with a 5 per cent deposit loses £20,000 off their maximum purchase price, which can significantly reduce their power purchasing,” she said.

Elliott Culley, director of Switch Mortgage Finance, said the stamp duty changes would slow the market and he believed house prices were likely to fall slightly around the £300,000 price point.

There could also be a “mad rush” as sellers and buyers try to meet the deadline before stamp duty changes, Mr Culley said.

“I would say that the stamp duty changes will certainly inconvenience some first-time buyers, particularly in London and the south of England,” he added.

David Hollingworth of L&C Mortgages said that while many first-time buyers “won’t feel the impact” of the changes, as those buying a property under £300,000 still won’t need to pay, others in parts of the UK would be affected.

He said: “First-time buyers will pay regionally and those in London and the South East are likely to be hit hardest. »

According to figures from Zoopla, the average house price in the UK stood at £267,500 in September 2024, but in several cities the figure is much higher.

In Cambridge, for example, it is £470,000 and in Oxford, £452,300.

Hollingworth said some sales could be delayed as buyers may need more time to put up a deposit if their stamp duty bill increases.

“However, with lower activity (in the market), this could provide an opportunity for those who wish to continue to trade a little harder,” he said.

What about mortgage rates?

In recent months mortgage rates have been falling, but this trend has reversed in recent weeks as many major lenders, including Santander, Halifax and Nationwide, have increased their rates.

According to Ms Beveridge, of the reductions over the summer, lower value lending deals – those available to households with larger deposits – benefited the most. So she said it was perhaps “still possible that loans requiring smaller deposits could fall a little further”, which would “support” prices as people could afford to borrow larger amounts.

However, others said it was unlikely lenders would be able to offset higher stamp duty costs with lower mortgage rates in order to attract customers.

Elliott Culley said he did not see low deposit mortgage rates falling “as a direct consequence” of the stamp duty rise.

“It will always be influenced by global events and the economic climate,” he said.

“But these rates need to be reduced in the long term to attract more first-time buyers into the market, as no one will want to bear high rates and high stamp duty,” he added.