First-Time Buyers Face New Challenges After Tax Relief Cut

Aspiring first-time buyers in London are facing a new set of affordability hurdles this spring, as the government phases out key tax reliefs and mortgage rates remain stubbornly high.

The temporary stamp duty relief introduced in 2022 — which raised the nil-rate threshold to £425,000 for first-time buyers — ended in April 2025. The threshold now reverts to £300,000, meaning a larger upfront tax bill for many London buyers.

At the same time, mortgage rates are averaging 4.75–5.25% depending on loan-to-value and fixed term. For a typical London starter home priced at £450,000, that means monthly payments around £2,300 for a 90% mortgage.

With affordability stretched, many first-time buyers are turning to shared ownership, Help to Buy ISAs, or family assistance. However, the winding down of national schemes and rising rents make saving harder than ever.

Brokers report longer lead times and a rise in fall-throughs due to mortgage rejections or valuation shortfalls. Some developers are responding by offering incentives — including deposit boosts or paying buyers’ legal fees.

Industry bodies have called on the government to reintroduce targeted support for first-time buyers. While inflation is easing and base rates may fall later in 2025, affordability will remain the central concern for this demographic.