Should you pay off your mortgage or buy a second property?

Last autumn, the UK’s first female Chancellor, Rachel Reeves, delivered the first Labour budget for 14 years, aiming to raise £40 bn in taxes. For homeowners, there were various changes which could affect whether you decide to pay off your mortgage or buy a second property. We look at the budget implications and how you might be affected.

Surge in property transactions

In the past two years, homebuyers have paid a reduced amount of Stamp Duty. However, the Chancellor confirmed that thresholds will revert to their previous levels on 1 April 2025. As a result, property experts have predicted a surge in transactions during the first quarter of 2025 ahead of Stamp Duty changes in April.

Currently, first-time buyers don’t have to pay Stamp Duty on properties worth up to £425,000. But this threshold will return to £300,000 from April. For all other homebuyers, the threshold will fall from £250,000 to £125,000. As buyers rush to complete before the next financial year, this may be followed by a slowdown in transactions in the months ahead.

Robert Gardner, Nationwide bank’s Chief Economist, believes one in five first-time buyers will also be affected. Gardener explained, “the impact will vary significantly across the country, largely as a result of the difference in house prices across the UK”.

Should you clear your mortgage?

If you’re thinking of clearing your mortgage, it’s worth noting that most lenders charge early repayment fees. However, if your mortgage is coming to an end soon, you may decide that the early exit fee is not worth it.

If you can afford to pay off your mortgage, consider if there are any other places to put the money. You might get more interest through pensions or savings, than your mortgage.
Alternatively, you could look at repaying costly debts, such as credit cards or vehicle finance. Even though they might be smaller loans, the interest is often higher, so it could be worth paying them off before your mortgage.

Stamp Duty on second homes

If you’re considering purchasing a holiday home, then beware that Stamp Duty has increased on second properties. Since 31 October 2024, people looking to buy an additional property will need to pay an extra 5% in Stamp Duty. It’s also worth noting that Capital Gains Tax (CGT) is charged on the sale of assets, which includes second homes. Both the lower and higher rates of CGT have increased to 18% and 24%.

Trusted mortgage broker

If you’re unsure whether to switch your mortgage deal or sell up, why not get a mortgage review? This is always worth doing if you’re approaching the end of your mortgage term. If you’re looking to buy a new home, then speak to us about getting a mortgage in principle. This will help to speed up the homebuying process when you come to make an offer.

At Bubble Finance Hub, we provide trusted and tailored mortgage advice to help you find the right solution for your needs. Our experienced mortgage advisers have whole of market access to hundreds of mortgage deals.

If you need a mortgage or a review, get in touch to book an appointment.

Your home or property may be repossessed if you do not keep up the repayments on your mortgage.
You may have to pay and early repayment charge to your existing lender if you remortgage.

Thank you for reading our blog, Should you pay off your mortgage or buy a second property?

Bubble Finance Hub