Following the announcement of Chancellor Rishi Sunak regarding the government’s budget plans for 2021, we have some insight into how the housing market could be affected in the upcoming months. The main takeaways from the Chancellor’s speech were that a new government-backed scheme will be introduced that encourages 95% mortgages and the tax relief on Stamp Duty for property buyers will be extended.
95% Mortgages Scheme
During his speech, Chancellor Sunak confirmed that the government would guarantee 95% mortgages will be offered from next month, in order to encourage more buyers with smaller deposits to get onto the property ladder.
It was revealed that major banks such as HSBC, Lloyds, Barclays and Santander would all be offering mortgages that require 5% deposits from April. Other lenders such as Virgin Money are also expected to follow. Sunak also confirmed that the scheme would be available to all borrower types and not just first-time buyers on the purchase of properties up to the value of £600,000, however this is not to apply to investment purchases. The scheme is currently expected to last until December 2022, giving time for potential buyers to get involved with the scheme.
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Stamp duty is a type of tax that is paid when purchasing a property. To help ease the economic strain on new buyers during the pandemic, the government introduced a nil-rate tax break on stamp duty last year. It has been confirmed by the Chancellor that the rate will remain at 0% from March until the end of June on properties up to the value of £500,000. From the start of July until the end of September, only properties up to the value of £250,000 will be exempt from Stamp Duty tax. From October 1st, the pre-covid stamp duty thresholds and levels are set to resume.
The rules are slightly different for first time buyers. Up until the end of June, the same rules will apply where you won’t need to pay any stamp duty on a property up to the value of £500,000. From July 1st however, the normal rules will apply for first time buyers, which is that you don’t have to pay any stamp duty on properties up to the value of £300,000.
Times are still fairly uncertain at the moment, but hopefully with this news regarding the budget and lockdown rules being slowly lifted, buyers can feel more encouraged to be able to enter the property market.