Mortgage approvals spiked in December and January.

The clock is ticking for first-time buyers who want to beat the end of the stamp duty holiday next month. Mortgage approvals spiked in December and January as buyers have been rushing to complete deals ahead of the March 24 deadline, after which anyone buying their first home for between £125,000 and £250,000 will have to pay 1 per cent stamp duty. Above this threshold the usual higher rates continue to apply (see below).

If you have yet to put down an offer or you are waiting for your mortgage to complete, you may still have time to save yourself thousands of pounds in tax — however, experts are warning that homebuyers should be careful about rushing through a deal without proper consideration, as it could be a false economy.

They are being urged to research valuations in their area carefully before making an offer, as there are fears that some prices may be artificially inflated ahead of the deadline while demand is higher. Sale prices may come down after the deadline if there is a slump in interest from new buyers.

Tracy Kellett, managing director of BDI Home Finders, says: “I would expect that as soon as the stamp duty holiday is over sellers may be offering larger discounts. If you are planning to buy now, you should look at selling prices in the area over the past three months to make sure they have not been creeping up ahead of the deadline. You should also be looking to buy somewhere that will be suitable for you to live in for the next five years, as if you need to sell sooner than that you could lose money.”

However, if you have done your research and you are comfortable that you have found the right property at the right price, here’s how to help ensure your mortgage completes in time to avoid an unnecessary tax hit:

Get your paperwork in order Before you submit your mortgage application, make sure that you have the documents required ready for inspection to prevent any delays. You are likely to need to show a driving licence or passport, a P60 end-of-year certificate of earnings, the last three months’ pay slips and bank statements, documentation for loans or credit cards and details of any other sources of income. The lender may want to see that the amount stated on the pay slip matches the amount being paid into your bank statement, to root out fraudsters.

Be realistic Check whether you meet the lender’s requirement using the affordability calculator on their website, which should tell you how much you can borrow. Do not try to borrow too much or it could delay your application.

Choose your lender wisely If time is of the essence, you may be better off choosing a lender that is not at the very top of the best-buy tables. That is because these lenders can get inundated with business and may apply stricter criteria to limit volumes or there may be delays in processing the application.

James Cotton, of London & Country, the mortgage broker, says: “Find out how long it will take to get an appointment with the best-buy lender and consider opting for a slightly more expensive rate if you think you are likely to save more in stamp duty.”

It may be worth using a broker who will be able to tell you which lenders are most likely to accept your application and process it quickly.

Do not turn a blind eye to the survey Buyers should not turn a blind eye to any serious issues raised about a property by surveyors in an attempt to complete before the deadline, as these could end up costing more to correct than the money saved.

Stay on the case Make sure that you respond promptly to any requests for additional information from your lender or the conveyancing solicitors. You cannot control how quickly they will deal with the issues, but at least if you fulfil your side of the process as swiftly as possible, you will not be creating unnecessary delays. Keep in touch with your mortgage broker (if you are using one) and the solicitors to make sure they stay on the case. Emphasise the urgency of the stamp duty deadline to ensure that your application is not swept to the bottom of the pile.

Martyn Smith, head of mortgage products at Legal & General, which has a network of brokers, says: “Typically, if all information is readily available and supplied to the lender up front, it should be possible to obtain a mortgage offer in 10 to 14 working days. However, some factors can prove to be outside of your control, for example, if you happen to be in a chain with other buyers and sellers there can be unforeseen problems.”

Steer clear of avoidance schemes As the deadline approaches, more companies may start promoting stamp duty avoidance schemes for those who do not complete their purchase in time. Steer clear of these as HM Revenue & Customs is planning a clampdown.

The price you pay

Stamp duty thresholds and rates:

• Up to £125,000 — zero

• From £125,000 to £250,000 — zero for first-time buyers until midnight on March 24. One per cent for other buyers and for first-time buyers from March 25 onwards.

• £250,000 to £500,000 — 3 per cent

• £500,000 to £1 million — 4 per cent

• More than £1 million — 5 per cent

‘Tax saving will help with wedding cost’

Case study

Last week we spoke to Fay Bednall, 29, and her fiancé Daniel Reinhold-Shor, 31, who are rushing to buy a flat in Bristol before the stamp duty exemption for first-time buyers ends. The couple, who both work in events management, have put in an offer on a property worth £140,000, so any delay could cost them £1,400 in tax if they miss the deadline. They were in the process of securing a home loan through their broker, London & Country, which had advised them which lenders would be most likely to process their application quickly. The couple received a mortgage offer from Halifax this week and are waiting for legal work to be completed before they can exchange contracts. They are saving up to get married next year so the tax saving will make a real difference.

Ms Bednall says: “We are now just waiting for the solicitors to do their part. We are crossing our fingers that the last bit of the process will run smoothly so that we can complete before the deadline.”