Hargreaves Lansdown has urged buyers not to rush into moving due to the stamp duty holiday, given that it’s causing short-term price inflation.
The Halifax house price index put inflation at 7.3% in the year to September, while home sales rose by 21.3% in the same month.
Sarah Coles, personal finance analyst, Hargreaves Lansdown, said: “The stamp duty holiday has prolonged the mini-boom, but the market risks becoming a victim of its own success.
“The short-term stamp holiday means buyers are hurrying to beat the March deadline, and demand is booming. This is inflating prices in the near term, because it’s a sellers’ market, and buyers can spend the extra cash they would otherwise have put aside for tax.
“Costs are also on the up. Mortgage companies are cashing in on the boom by pushing interest rates up across the range of products, and adding higher fees. There may also be extra costs caused by delays in the buying and selling process.
“The boom in demand has overwhelmed the system, so this is taking far longer. The more delays there are, the higher the risk of failure, and when chains start to break, buyers risk losing thousands of pounds in failed purchases.”
She added: “Buyers may not be concerned about rising prices and higher costs while there’s some momentum behind the market, but this isn’t going to last forever.
“As government coronavirus support becomes less generous, it will eventually take its toll on jobs, confidence and house prices.
“The banks are already worried about house prices as we get towards the end of the year, so when we draw towards the end of the stamp duty holiday, we could well see some more significant falls.
“This doesn’t mean everyone should steer clear of the housing market. If you need to move, you can afford the home you want, and you expect to stay there for a significant period, you shouldn’t let worries about the market trap you in the wrong home.
“However, this is no time to rush into a move you’re not entirely happy with for the sake of a tax break.”