Stamp Duty Holiday Extended
As expected, in the budget 2021 the chancellor has announced in the stamp duty holiday has been extended by three months to the 30th June 2021 on properties valued up-to £500,000. This will allow more buyers to take advantage of potential savings and potentially boosting UK house prices further.
Since the tax holiday was introduced in July 2020, the property industry has struggled to cope with surging demand, creating bottlenecks in transactions for mortgage brokers and conveyancers.
The threshold will be reduced to £250,000 from the 1st July 2021 to 30th September 2021. Homebuyers in England and Northern Ireland will not pay stamp duty on the first £250,000 of their property value, before the nil rate threshold returns to £125,000 from 1st October 2021.
The new deadline will most benefit those who are already underway with their property sale or purchase, given that the timescale to complete before the new deadline remains tight. It is expected this extension will not cause such manic property activity, due to the short time frame available to start and complete transactions.
Given the supply of new homes coming onto the market remains below levels witnessed during the comparable period last year, a boost to demand could mean elevated levels of sales price inflation continue. In February, Nationwide’s house price index recorded annual growth of 6.9 per cent, up from 6.4 per cent in January.
Guarantee on 95 per cent LTV Mortgages
The government also confirmed in the budget 2021 that it will provide a guarantee on 95 per cent loan-to-value mortgages on property purchases up-to £600,000 with a 5% deposit. Homebuyers will be given the opportunity to fix the initial interest rate on the mortgage for up-to 5 years. The eligibility criteria is that the mortgage must be residential i.e. not a second home or buy-to-let. The mortgage must be taken out by an individual or individuals and have a loan-to-value of 91-95%. Standard affordability requirements still apply.
The scheme could lower the cost of repayments for borrowers. For instance, if current 95 per cent LTV rates drop to 75 per cent rates to reflect the lower risk to the lender, it has the potential to bring down the monthly cost of repayments significantly.
The scheme will be available for new mortgages up to 31 December 2022 and allow borrowers to fix their initial mortgage rate for at least five years.
Also announced in the Budget 2021 and a boost for the construction industry, an initial £12bn of capital investment for the National Infrastructure Bank (NIB). The NIB was unveiled in the November Spending Review and is due to launch in Leeds this Spring. It will help fund both public and private projects across the UK as part of the government’s ‘levelling up’ agenda and the aim to reach net zero carbon emissions by 2050.
It will provide funding through a mixture of loans, guarantees and equity stakes, the idea is to de-risk infrastructure projects and encourage more private investment across sectors such as transportation and renewable energy. The NIB will also replace some of the funding that could previously have been secured from the European Investment Bank as a member of the EU. The Chancellor says that the NIB could support at least £40bn in total infrastructure spending.
The Budget 2021 saw the tax cut extended for a further 3 months which will allow those who have started property sales to complete them conformably without missing out on the discount.
The 95% LTV mortages goverment back will be welcome to first time buyers who are looking to ventorue onto the porperty ladder.
There were also a couple of minor dabbles into the green investment with £12bn being set aside.
What are your thoughts on the Budget 2021 and its affect on house prices? Comment below…