Use Stamp Duty savings to pay down debt, urges Barclays
Borrowers should resist the temptation to spend their unexpected Stamp Duty savings on new furniture or clearing post-Christmas card debt and focus on their mortgage, said Barclays’ head of lending Andy Gray.
Speaking about George Osborne’s Autumn Statement announcement which saw the old slab structure of the tax abolished in favour a progressive structure like income tax, Gray urged borrowers to put their windfalls to good use.
“Reducing the mortgage amount even by a small amount could lead to a not inconsiderable interest saving over the term of the mortgage,” he said.
“Also, a reduction in the borrowing amount could tip the mortgage into a lower LTV (loan-to-value) bracket, so switching to a lower interest rate could be an option, with further payment savings to be made.”
Under the new rules, people buying homes will only pay the tax rate on the part of the property which falls within a band instead of paying it on the whole property price.
Osborne also changed the rates and band parameters for the tax.
For homes up to £125,000 no stamp duty is payable then;
£125,001 to £250,000 – 2%
£250,001 to £925,000- 5%
£925,001 to £1,500,00- 10%
£1,500,001 and above 12%
Gray said borrowers taking actions to reduce their mortgage balances could find it more beneficial than putting the funds into an ISA given the rate differential between savings and mortgages.
Barclays is offering to waive its product switching fee of £150.00 for borrowers in the process of taking a Woolwich mortgage who find that they can change to a lower LTV bracket if they put their Stamp Duty savings towards the purchase of their property.