Budget 2021 – All You Need To Know About The Housing Market

With all the uncertainty the pandemic has brought across the country over the past year, the housing market awaited the Budget announcement last week with some trepidation.

So, we were relieved to see Rishi Sunak announce an extension to the Stamp Duty Holiday until 30th June, which will support the housing market as well as protect and create jobs.

The Chancellor has also introduced a new, government-backed 95% mortgage scheme, which will allow homebuyers to secure a mortgage of up to £600,000 with just a 5% deposit.

The measures are a welcome lifeline for the property market, creating a whole host of opportunities for a greater demographic.

Here we tell you all you need to know about the housing market following the Budget announcement.

Stamp Duty Holiday

Stamp Duty Holiday has been extended so that now, anyone buying a home up to the value of £500,000 will avoid paying any stamp duty if they complete before the end of June.

Stamp Duty Land Tax is a tax paid on the purchase of property or land in England and Northern Ireland.

In summer 2020, the government temporarily removed Stamp Duty for property sales under £500,000. This was due to end abruptly on 31 March, but, following the Budget announcement, will now run until 30 June.

The extension means that anyone completing a purchase on a main residence costing up to £500,000 before 30 June will not pay any stamp duty at all. Only more expensive properties would be taxed on their value above that amount.

And that’s not all. There was sensible and practical announcement of a phased return to the pre-Covid Stamp Duty threshold to allow for a ‘smooth transition’ back to normality.

This means the nil rate band will be £250,000 – double its standard level – until 30 September 2021.

October will see it return to the usual threshold, so will be paid on property sold for more than £125,000.

Although this could still see plunges to the market in June and September, it is much more preferable to an immediate hike.

With hundreds of thousands of buyers trying to make the most of the stamp duty savings on offer, some movers are finding that the process is delayed and drawn out as councils, solicitors and conveyancers continue to work throughout the challenges of the pandemic. These new measures will help dramatically as they will now still get to benefit from such a worthwhile saving.

Mortgage Guarantee Scheme

There was also some good news for first time buyers with the announcement of a government guarantee scheme on 95% mortgages, with some High Street banks already on board to start offering this from as early as next month for houses worth up to £600,000.

The new UK-wide mortgage guarantee scheme will make the housing market so much more accessible for so many more people, who were understandably struggling to find 15% or even 20% during a worldwide pandemic.

From 1 April 2021 to 31 December 2022, if you have a 5% deposit, the government will provide a guarantee to lenders on the money you borrow.

Homebuyers with these small deposits will be able to fix their mortgage rate for at least five years to enable greater confidence in purchases.

In order to be eligible you must:

·        Be a UK homebuyer

·        Apply for a repayment (not interest-only) mortgage

·        Pass standard affordability checks, including a loan-to-income test and credit score assessment.

·        Ensure the mortgage you’re applying for is between 91% and 95% of the value of the property you’re buying, which you’ll see described as ‘LTV’.

·        Choose a property worth up to £600,000

·        Be buying a property to live in – buy to let or second properties are not eligible

So, what does it mean for you?

If you are looking to move house, or invest in your very first home, now is a good time to consider your options as these new measures mean there are more opportunities and savings to be made.

We are edging back towards some semblance of normality and these initiatives will go some way towards making that transition more palatable for those trying to set up home. It is always wise to be cautious, but we are optimistically cautious for what the future might hold.

Don’t forget, we have a brand-new mortgage advice service available for anyone who might need questions answering and we are always happy to help. Call today on 01536 261666.