There has been a raft of good news in today’s budget for those looking to move house. Chancellor, Rishi Sunak announced an extension to the Stamp Duty Holiday, avoiding the cliff edge deadline of 31 March 2021. We know that this will be welcome news to conveyancers across the industry who have been under heavy pressure to complete transactions in advance of the deadline, to save hefty tax bills for buyers.
Also announced was the anticipated 95% Mortgage Guarantee. Finer details on how the scheme will work are yet to be released, but we’re sure this will be good news for those looking to buy. Especially those buying their first home.
Stamp Duty Holiday extension
Back in July 2020, Chancellor Rishi Sunak announced a temporary Stamp Duty Land Tax (SDLT) holiday in England and Northern Ireland as a method of rebooting the economy during the pandemic.
Stamp duty, which is transfer tax to pay when buying a home, was reduced to zero if the purchase of a main residence was £500,000 or less. Any such transaction over this amount (but only the sum over £500,000) will face the tax.
For example, a £600,000 transaction will face the lowest rate of SDLT (available on purchases between £500,001 and £925,000) of 5%. Only the £100,000 over the threshold will face the tax, and 5% of £100,000 is £5000. So, in this scenario, the buyers will pay £5000 in stamp duty.
Previously, any buyer of a main residence costing over £125,000 would have to pay stamp duty, or £300,000 for first time buyers.
Increased Nil-Rate Band
The increased nil-rate band (NRB) for SDLT has been brought in as an effort to boost the property market that was hit hard by national lockdown and saw house prices decrease for four months in a row.
This £500,000 threshold for stamp duty was set to run until the end of March 2021. However, the Chancellor, Rishi Sunak has just announced as part of his Budget that it shall remain in place until the end of June 2021 instead.
Looking further forward, from July onwards until the end of September, the stamp duty NRB will drop to £250,000, which is still double the pre-pandemic threshold.
It will then return back to the usual £125,000 on 1st October 2021.
95% Mortgage Guarantee Scheme
Also in today’s Budget, Rishi Sunak announced plans of a Mortgage Guarantee scheme for homebuyers starting in April 2021.
He said that this mortgage guarantee scheme will give those who are struggling to save a big deposit, the chance to buy a home.
The scheme will provide buyers the chance to pay just a 5% deposit on houses worth up to £600,000.
Low deposits had pretty much disappeared of recent, mainly due to the ongoing pandemic. Mortgage lenders were willing to lend a maximum of 90% in most cases, leaving buyers having to find enough cash to pay a 10% deposit or higher.
The requirement to save a large deposit has been acting as a frustrating barrier especially to first-time buyers trying to get on the property ladder. Thankfully, many lenders are now backing this new scheme.
The government’s plan is to turn “generation rent, into generation buy.”
However, unlike the Help to Buy Scheme it hasn’t been specified that this 95% Mortgage Guarantee scheme is exclusive to first-time buyers. Although it is aimed at helping first-time buyers mainly, it will be available to all buyers looking to secure a property of up to £600,000 up until 31 December 2022.