A three-month stamp duty extension and a new government-backed mortgage guarantee scheme are two measures announced by Rishi Sunak in the Spring 2021 Budget that could help London home buyers and sellers.
On the 3rd March, Chancellor Rishi Sunak delivered the Budget 2021 speech during which he announced major new plans for property and mortgages in London and across the country. Here’s what you need to know…
Stamp Duty Holiday extension
In February, Rickman Properties London highlighted the widespread calls for the Government to extend the Stamp Duty Holiday beyond 1st April and we looked forward to the Budget speech where Rishi Sunak was most likely to heed the call. The Chancellor indeed announced an extension to the Stamp Duty Holiday as it is to the 30th June i.e., no stamp duty to be paid when buying a residential property up to £500,000 (a continued threshold increase to the standard nil rate band of £125,000).
From 1st July, the nil rate band will then be reduced to £250,000 until the end of September, before returning to the usual of £125,000 from 1st October. The Chancellor announced this would help to “smooth the transition back to normal”, avoiding the ‘cliff-edge’ scenario previously expected. First-time buyers continue to benefit from a separate threshold, paying no stamp duty for a residential property at £300,000 or less from 1st July.
In his speech, the Chancellor explained why the Government is extending the Stamp Duty holiday,
“The cut in stamp duty I announced last summer has helped hundreds of thousands of people buy a home and supported the economy at a critical time. But due to the sheer volume of transactions we’re seeing, many new purchases won’t complete in time for the end of March. So, I can announce today the £500,000 nil rate band will not end on the 31st of March, it will end on the 30th June.”
According to Right Move, there are an estimated 628,000 sales still currently in the legal process across the county. This extension affords some breathing space to those home buyers, especially those in a chain who have been deeply concerned about the looming deadline.
The tax-holiday has given the housing market a well-deserved boost, which Rickman Properties London welcomes. There have been more mortgage approvals in 2020 than in 2019 despite lockdown and house prices have also been on the up throughout 2020, with Nationwide recording a six-year high on annual house price growth at 7.3% by the end of 2020.
Mortgage Guarantee Scheme
Following the Stamp Duty Holiday extension announcement, the Chancellor announced a further measure affecting mortgages,
“Even with the stamp duty cut, there is still a significant barrier to people getting on the housing ladder – the cost of a deposit. Lenders who provide mortgages to home buyers who can only afford a 5% deposit, will benefit from a government guarantee on those mortgages.”
The new 95% government-backed loan to value (LTV) mortgage scheme, launching in April, will incentivise lenders to offer mortgages to “people who can’t afford a big deposit”, providing them with “the chance to buy their own home” and turning “Generation Rent into Generation Buy”, according to Sunak.
The detail so far states these 95% mortgages will be offered on homes priced up to £600,000, on a repayment basis, rather than interest-only, and that lenders must allow borrowers to fix their mortgage rate for at least 5 years.
The Chancellor announced that “several of the country’s largest lenders including Lloyds, NatWest, Santander, Barclays and HSBC will be offering these 95% mortgages from next month”. The government-backed mortgages are set to be available for new mortgages up to 31 December 2022.
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