Mortgage Approvals Plummet Post-Stamp Duty Holiday

April 2025 marked a turning point for the UK housing market, as mortgage approvals fell to their lowest level since February 2024. The decline came hot on the heels of the end of the government’s stamp duty exemption—a measure that had provided a temporary boost to market activity. While analysts argue this dip may simply represent a short-term correction, it also underscores deeper questions about the housing market’s resilience and long-term direction.

In this article, we explore the causes of the decline in mortgage approvals, assess the broader implications for buyers, sellers, and lenders, and examine whether the UK housing market is merely pausing—or beginning to falter.

Understanding the Drop: By the Numbers

According to the Bank of England, the number of mortgage approvals in April 2025 stood at 46,700, down from 62,800 in March. This represents a 25.6% month-on-month decline, and the lowest level seen since early 2024. The steep drop coincides precisely with the conclusion of the stamp duty exemption introduced in 2023, which waived tax on properties up to £250,000 for first-time buyers and £400,000 for others.

While the government always intended for the holiday to be time-limited, its removal had an immediate chilling effect. Buyers who rushed to complete transactions before the 31 March 2025 deadline left a noticeable void in the market in the following weeks.

The Role of the Stamp Duty Holiday

The stamp duty holiday was implemented in response to a sluggish market in late 2022 and early 2023. With inflation high and mortgage rates elevated, the housing market was in need of stimulus. The exemption spurred a flurry of buying activity, particularly among:

• First-time buyers, who took advantage of reduced upfront costs
• Buy-to-let investors, aiming to expand portfolios while tax liabilities were low
• Upsizers, encouraged to move sooner rather than later

This artificial stimulus pulled forward demand, creating a mini boom in late 2023 and early 2024. Property prices rose, estate agent listings surged, and conveyancing firms faced bottlenecks as buyers raced to complete before the deadline.

However, economists warned that this demand was not organic or sustainable, and that a post-holiday drop-off was almost inevitable. April 2025 has proven them right.

Are We Looking at a Temporary Dip?

Some analysts argue that the April figures should be taken with a pinch of salt. According to Savills, much of the dip is a natural consequence of the end of the tax break and not a sign of structural weakness. They point to several stabilising factors:

• Mortgage rates have begun to ease after peaking in late 2024
• Wage growth remains robust, supporting affordability
• Unemployment is low, underpinning borrower confidence

In this view, April’s numbers reflect a market catching its breath rather than collapsing. Many potential buyers are simply reassessing their finances or waiting to see if prices soften before making a move.

The Counterpoint: Signs of Market Softening

Other voices are more cautious. The Royal Institution of Chartered Surveyors (RICS) reports that new buyer enquiries also fell sharply in April, alongside a drop in agreed sales. Combined with softening asking prices in some regions, these indicators suggest a more prolonged slowdown could be on the cards.

Nationwide Building Society, for instance, noted that house prices only rose by 0.2% in April compared to March, following a 0.5% drop in February. While not a dramatic fall, this stagnation is a marked contrast to the growth seen during the stamp duty holiday.

If this trend continues into the summer months, it may point to a cooling phase, particularly in southern England where affordability remains stretched.

Impact on First-Time Buyers

For first-time buyers (FTBs), the picture is mixed. The end of the stamp duty break increases upfront costs, making entry into the housing market more challenging. However, lower competition and stabilising prices could provide an opportunity for those with patience and a long-term view.

The scrapping of mortgage stress tests in 2024 may offset some of the cost barriers. Combined with the expansion of 95% mortgage products, the credit environment remains relatively supportive.

Still, the reality is that FTBs are often the most sensitive to market fluctuations. A sudden drop in approvals could signal diminished confidence among this key group of buyers.

Buy-to-Let and Investor Behaviour

Investors, too, have taken a step back post-holiday. The stamp duty exemption made portfolio expansion more appealing, but now that standard rates apply again—including the 3% surcharge on second homes—many are reassessing.

Hamptons reports that buy-to-let mortgage applications fell by 18% in April. Combined with tougher regulatory standards and changes to capital gains tax allowances, the sector may see a period of contraction.

However, rising rents across much of the UK provide a counterbalance. In cities like Manchester, Birmingham and Bristol, rental yields remain attractive. Some landlords may simply pause, rather than exit the market entirely.

Regional Disparities

The decline in mortgage approvals has not been uniform across the UK. Data from Zoopla suggests:

• London and the South East have seen the sharpest drops, reflecting the higher price points and greater sensitivity to tax changes
• The Midlands and North West have proven more resilient, aided by relatively affordable housing and strong local economies
• Scotland and Wales show mixed trends, influenced by devolved tax regimes and planning policies

These regional variations are important. A national slowdown may mask hotspots of continued activity, or indeed pockets of more pronounced weakness.

What Does This Mean for Sellers?

Sellers now face a more uncertain landscape. With fewer buyers in the market, properties may take longer to sell, and asking prices may need to be adjusted.

Estate agents report a rise in price reductions, particularly among sellers who listed properties in early 2025 hoping to capitalise on the final days of the tax break. The average time to sell a property rose from 29 days in March to 38 days in April, according to Rightmove.

This does not yet constitute a buyer’s market, but the balance of power is shifting.

The Role of Interest Rates and Economic Outlook

The trajectory of the housing market in the coming months will hinge heavily on interest rates. The Bank of England held the base rate at 4.5% in its May meeting, citing stable inflation and strong employment figures.

However, financial markets anticipate at least one rate cut by the end of 2025, assuming inflation continues to moderate. Lower rates could revive borrowing demand, particularly if coupled with stable or falling house prices.

Broader economic factors—such as GDP growth, employment trends, and consumer confidence—will also play a crucial role. So far, the economy has proven more resilient than expected, but any deterioration could tip the housing market into a more prolonged slump.

Mortgage Lenders’ Response

Lenders are closely monitoring the situation. Some have responded to April’s dip with more aggressive marketing, cashback offers, and product tweaks to lure hesitant borrowers.

Nationwide, Halifax, and Barclays have all introduced limited-time deals on fixed-rate mortgages, while niche lenders are expanding options for self-employed borrowers and those with complex income streams.

The Financial Conduct Authority (FCA) has also indicated it is watching the market closely, but sees no immediate need for intervention.

Developers and New-Build Implications

Housebuilders are feeling the effects of reduced buyer activity, particularly in the first-time buyer segment. While completions remained steady in Q1 2025, forward sales reservations dipped significantly in April.

Taylor Wimpey and Barratt Developments have both revised their forward guidance, citing weaker-than-expected demand post-stamp duty holiday. Some developers may scale back land acquisition or delay new phases of existing projects if trends persist.

On the other hand, the government’s continued support for affordable housing and shared ownership schemes may cushion the blow.

Could Government Intervene Again?

Given the political sensitivity of the housing market, some have speculated about a potential reintroduction of targeted tax reliefs or support schemes.

Options under discussion include:

• A new first-time buyer ISA boost
• Stamp duty relief for specific demographics (e.g., key workers)
• Targeted mortgage guarantees for low-deposit borrowers

However, with public finances under strain and an election on the horizon, policymakers may be reluctant to repeat broad-based tax relief schemes.

Looking Ahead: A Bumpy Road or a Soft Landing?

April’s slump in mortgage approvals is a clear sign that the housing market is entering a new phase—marked by caution, recalibration, and reduced government intervention.

The key questions are:

• Will buyer confidence rebound in the summer months?
• Can mortgage rates fall fast enough to offset rising transaction costs?
• Will housing supply improve to meet latent demand?

If conditions remain broadly stable, the market could experience a soft landing. However, if macroeconomic pressures mount—or if inflation ticks upward again—April 2025 could mark the start of a more significant downturn.

Conclusion: Navigating the Post-Holiday Market

The drop in mortgage approvals following the end of the stamp duty holiday was widely anticipated. What remains unclear is whether this is merely a short-term blip or the beginning of a more sustained correction.

Buyers and sellers alike will need to adjust expectations. The days of ultra-cheap borrowing and government-fuelled demand are over, at least for now. Success in the current market will depend on realism, adaptability, and timing.

For policymakers and regulators, April’s numbers serve as a wake-up call. A healthy housing market cannot be propped up indefinitely by tax breaks and incentives. Long-term stability requires a more fundamental balance between demand, supply, affordability, and access to credit.

As the UK housing market resets post-stamp duty holiday, the coming months will provide the clearest insight yet into its true resilience.