In the Chancellor’s budget this week, Rishi Sunak announced some policies set to impact prospective home owners and buyers as the government looks to help the economy bounce back from the coronavirus pandemic.
Stamp Duty Holiday Extended
The Stamp Duty Holiday, introduced in July 2020 to kickstart the property market after last Spring’s lockdown, has now been extended until June 2021. The holiday which applies to property up to the value of £500,000 had originally been due to end this month but campaigners had raised concerns that thousands of house sales could fall through due to delays caused by the influx in demand.
It is estimated that around 160,000 house sales would have been left in limbo had the original deadline remained in place. Now Mr Sunak has offered the tax relief to thousands more prospective home buyers until at least June. After this, the Stamp Duty Holiday will continue to apply to properties worth up to £250,000 until the end of September to aid a smoother transition before the rate returns to its original threshold of £125,000.
We have written previously on the projected economic benefits of an extension of the Stamp Duty holiday. You can read more about this here.
It is important to remember that if you are buying an investment property or second home, the Stamp Duty holiday only applies to the standard rate of Stamp Duty and the 3% Higher Rate will still apply on the full purchase price.
Government Guaranteed 95% Mortgage
As often becomes the case when the country is suffering an economic downturn, lenders have steered away from offering mortgages with a smaller percentage deposit to reduce their risk in lending.
However, the Chancellor has now announced that major lenders will once again be offering mortgages to prospective buyers who can only afford smaller deposits of 5% by providing a government guarantee on 95% mortgages on properties valued up to £600,000.
Similar to the now closed Help to Buy mortgage guarantee scheme, the new scheme has been set up in an effort to help people who wouldn’t normally be able to get on the property ladder with smaller deposits but it is actually open to current homeowners as well as first-time buyers, and will not only apply to new properties.
This move however, has been criticised by campaigners and opposition MPs who fear it will trigger an upcoming housing crisis. Housing charity Shelter has said that the Help to Buy scheme triggered a 1.4% increase in house prices.
If the same were to happen this time, rather than being an opportunity for first-time buyers it might actually be more of a benefit to sellers who could see the value of their property increase.
If you are looking to buy, sell or remortgage property, Farleys’ residential property experts can help you with the conveyancing process. Get in touch with us today on 0845 287 0939 or submit your enquiry online.