Sunday, 9 May 2021

300,000 more home buyers could benefit from stamp duty holiday extension

Budget 2021: Sunak announces stamp duty nil rate extension

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And he also announced a new mortgage-guarantee scheme to help people with five percent deposits on to the housing ladder. The initiative will persuade lenders to provide mortgages to first-time buyers – as well as current home owners – to buy properties worth up to £600,000. The Government will offer lenders the guarantee they require to provide mortgages covering the remaining 95 percent. Within minutes of the announcements there were signs of house hunters rushing to see what was available.

Rightmove said use of its mortgage calculator jumped by 85 percent and overall traffic rose by 16 percent just half an hour later.

Richard Donnell, research director at property website Zoopla, said: “Supporting buyers with small deposits is key to widening access to home ownership for a part of the mortgage market that has been under-served.”

Buyers would benefit most in “lower value housing markets” in northern England and Scotland, where a 95 percent mortgage is more attainable.

He added: “This all supports the levelling-up narrative and policy approach of Government.”

Rightmove expert Tim Bannister said: “This extension will come as a huge relief for those people who have been going through the sales process since last year and were always expecting to make use of the stamp duty savings.

“Our recent data shows one in five sales agreed in the same month the stamp duty holiday was first announced in July last year still haven’t completed.

“So this additional time will make a big difference to help those stuck in the logjam complete their purchase in time before the new end-of-June deadline.”

Introduced in the summer, the holiday will remain until the end of June – then there will be a “tapered” period running until September.

Mr Sunak said the temporary increase in the nil rate stamp duty band will be maintained at £500,000 in England and Northern Ireland until June 30.

From July 1, the band will reduce to £250,000 – until September 30. It will then return to its original £125,000.

Rightmove said 45 percent of transactions in England will still be exempt from stamp duty in the tapering period. Property professionals said the announcement will be a “huge relief” to those who had been stuck in transaction bottlenecks, saving them thousands of pounds.

Salman Haqqi, personal finance expert at money.co.uk, said: “The news is a real boost for those in the process of buying a house.

“The changes are already having a positive impact on the market. House sales have increased to their highest level since before the 2007 financial crisis.

“Sales in lockdown were up 26 percent at the end of last year compared to 2019.

“And the average number of days it takes to sell a property has plummeted – falling to 49 days in November from 67 a year earlier.

“How much you can save will depend on the price of the property you buy. The more you pay up to the £500,000 threshold, the more you’ll save.

“Now we have an extension it means many more people will be able to take advantage of the stamp duty holiday and that should provide a huge extra boost to the housing market in the coming months.”

In recent months, house prices have jumped to record highs, fuelled by buyers wanting to move to make lifestyle changes and take advantage of the reduction.

Lenders who have signed up to the new mortgage guarantee scheme include Lloyds, Santander, NatWest and Virgin Money.

Buyers will have the option to fix their initial mortgage rate for at least five years, giving them certainty over their repayments.

The scheme will be available for new mortgages up to December 31, 2022, and will be available on new or existing properties.

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Extensing the Stamp Duty holiday will be a welcome reprieve for buyers and sellers struggling to complete house purchases by March 31.

This task has not been helped by pressures due to the pandemic.

The UK average house price is £250,000, so this policy takes an average home out of the stamp duty system for the next six months.

Instead of an abrupt end to the scheme at the end of this month, the extension to June 30 provides up to a £15,000 stamp duty saving. Then there’s a further three months from July 1 to September 30, with a reduced holiday saving of up to £2,500.

This is because the nil rate stamp duty band, raised to £500,000 during the holiday, will reduce to £250,000 from July 1 until September 30 this year, after which it will revert to its pre-holiday level of £125,000.

The announcements on stamp duty and mortgage guarantees come together with ongoing positive trends in the housing market.

Now the Office for Budget Responsibility expects property prices to rise by an average of five percent in 2021.

This sharply revises upwards its November 2020 forecast by nine percent.

The long list of related industries, including finance and insurance providers, house movers, furniture and garden retailers, also stand to benefit.

This could provide a welcome economic boost as the pandemic restrictions are due to ease and is just in time for the summer.

When the holiday does end, first-time buyers will still be able to take advantage of the existing exemption for properties under £300,000 and partial relief for purchases up to £500,000.

And let’s not forget the Government’s new mortgage guarantee to help buyers with a five percent deposit starting from next month.

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