The Government announced an expected extension to the stamp duty holiday alongside a government-backed mortgage guarantee scheme in the Budget on Wednesday with the measures aimed at helping home buyers and sellers.
Stamp Duty Holiday extension
The temporary stamp duty holiday in England and Northern Ireland has been extended by three months. This means that if you are buying a home up to the value of £500,000 you will not pay any stamp duty if the purchase is completed by 30 June 2021. After that date, the nil rate threshold will be set at £250,000 until the end of September, before returning to the usual threshold of £125,000.
Since its introduction last July, the stamp duty holiday has helped to sustain the housing market with a combination of pent up demand and increased supply last autumn leading to many transactions being agreed. With solicitors burdened with instructions, there was a risk that many of these would not complete in time to meet the previous deadline set of 31st March. The Government’s announcement will be a relief to home buyers and sellers who have been desperately trying to get their sale completed with an estimated 628,000 sales in total still currently in the legal process across Great Britain, including those that were agreed last year and those that have been agreed so far this year.
As the current lockdown hopefully comes to a final conclusion, the continuation of the holiday is likely to help maintain firm demand although buyers will have a race on their hands to see if they can make full use of the potential savings before the end of June. It should be remembered however that first time buyers remain exempt if they are buying for £300,00 or less.
The mortgage guarantee scheme
To help buyers with small deposits to get on to the property ladder, the government has introduced a 95 per cent loan to value (LTV) mortgage guarantee scheme. The scheme will bring back low deposit mortgages with the aim of giving people who can't afford a big deposit the chance to own a home.
From April 2021, the government will provide a guarantee to lenders across the UK who offer mortgages to people with a deposit of just 5% on homes with a value of up to £600,000. In practice, this means that mortgages will be available to people for just a 5% deposit, meaning you can borrow 95% of the house price from the bank.
The new scheme is not restricted to first-time buyers, but can be used by anybody buying a main home. It will be available until 31 December 2022. The Chancellor said many of the big lenders, including Santander, Lloyds, Barclays and HSBC are backing the scheme and will be offering “government guaranteed” mortgages from next month.
"With 95% mortgages now set to make a comeback within the next month, this will make home ownership a very realistic goal for first-time buyers and will provide a helping hand to those who want to trade up."