We react to the Chancellor’s Budget stimulus package for the housing market. To discuss your residential property requirements, including requesting a conveyancing quote, please contact our Property Team by email, or call them on 01225 462871. You can also request a conveyancing quote online.
Over the last couple of weeks, it’s been increasingly rumoured that against expectation, the Chancellor was on the cusp of announcing an extension to his Stamp Duty holiday. And so it’s transpired. In today’s budget, he announced that the temporary increase in the ‘nil-rate-band’ to £500,000 would continue until the end of June. The nil-rate-band will then fall to £250,000 from July until the end of September.
BLB property expert, Caroline Entwistle, said “While in recent days the Chancellor’s intention to extend the Stamp Duty holiday by three months had become all but certain, the surprise today has been the announcement of the additional three months of tapering. This will mean that the cliff edge facing buyers unable to complete by the end of June will not be quite as precipitous as that which had been predicted for the end of March.”
Supply vs Demand
We recently reported that while levels of demand in the housing market remain healthy, supply has become a real problem. In January, 21% fewer properties came to market than in January 2020. Whether this extension to the Stamp Duty holiday will encourage more homeowners to market their property remains to be seen. It’s hoped that with the vaccination rollout continuing apace, firm plans for lockdown easing, and spring almost upon us, those supply problems will begin to ease.
Perhaps of greater benefit to first-time buyers is the Chancellor’s announcement of a low-deposit guarantee scheme. While not limited to first-time buyers, they will certainly be the major beneficiaries. Economic uncertainty surrounding the pandemic has seen the vast majority of high loan to value mortgage products withdrawn by mortgage lenders.
“A few lenders have reintroduced high loan to value products over the last couple of months, but those still require a deposit of at least 10%, which is beyond many first-time buyers,” said Caroline. “And without first-time buyers entering the market, the market will quickly stall. Providing a government-backed guarantee to those lenders prepared to advance 95% of the purchase price is bound to increase the number of products available, in turn providing considerable stimulus to the market.”
The government-backed mortgages will be available to all buyers of properties costing up to £600,000, which currently accounts for 86% of homes on the market in the UK. Buyers will also be able to fix their initial mortgage interest rate for at least five years.