What do the stamp duty extension and 95% mortgages mean for home movers?

March 4, 2021

In a Budget that saw speculation, rumours and theories like no other, Chancellor Rishi Sunak outlined a series of changes to uplift the economy during the coronavirus crisis.

It came as no surprise that property featured front and centre. Sunak announced that the stamp duty holiday would be extended to the end of June, and details of the soon-to-launch mortgage guarantee scheme for property buyers.

Other points of interest were the extension of the furlough scheme and business rates relief for the retail, hospitality and leisure sectors until the end of September.

Below, we explain the extension to the stamp duty holiday and the rise in 95% mortgages and what this means for property buyers and sellers.

Stamp duty holiday extended until June

The Chancellor confirmed that the temporary stamp duty holiday would be extended from March 31 to June 30.

From July 1, the holiday will apply only on properties up to £250,000 until the end of September, meaning that the pre-Covid stamp duty threshold will not resume until October 1.

People purchasing property until June 30 can still benefit from savings of up to £15,000. After this date until the end of September, the maximum stamp duty saving available will be reduced to £2,500.

The extension comes after many had raised concerns that home purchases could collapse if the holiday finished abruptly at the end of March.

Currently, it is uncertain whether these dates will end with the dreaded ‘cliff-edge’ or will be tapered to avoid a last-minute disappointment for some buyers.

As part of his announcement, Sunak said the holiday ‘has helped hundreds of thousands of people buy a home and supported the economy at a critical time’, but due to the sheer volume of transactions, many new purchases won’t complete in time for the end of March.

However, with the extension now confirmed, many property purchasers will benefit from additional tax savings, helping to sustain the housing market for the rest of the year.

Rightmove figures underline this, with estimates suggesting an additional 300,000 property transactions could pass by the end of June, allowing buyers to save £1.75 billion in total.

Mortgage guarantee scheme to help first-time buyers

Sunak also confirmed plans for the government to guarantee 95% loan-to-value mortgages to help first-time buyers get on the property ladder.

The scheme, which was first announced by Boris Johnson last October, will enable all UK homebuyers to secure a mortgage up to £600,000 with a 5% deposit.

Due to the increased level of lending, 95% mortgages usually come with higher interest rates, with buyers who pay a deposit of 40% or higher benefitting from the most favourable rates.

The coronavirus pandemic saw low-deposit lending virtually disappear and the number of products for borrowers has only recovered to a fraction of what it was before March 2020. However, the government is hoping that the scheme will encourage lenders to start lending more to those purchasing a home for the first time.

Although increased lending like this should be treated with caution, particularly during a global pandemic, more 95% mortgages could provide a much-needed boost for the property market.

First-time buyers can enter the property market without having to save as much money. This, coupled with the extended stamp duty holiday, means they are in an even better position to fulfil their dream of stepping on to the property ladder much sooner.

This has knock-on benefits for the sales market. If more buyers are interested in a seller’s property, the chances of selling quickly and for the best possible price are increased.

Here at Chimneypots estate agents, we are doing all we can to help our clients during these uncertain times. If you require further guidance on selling your home successfully in South Coast locations – such as Southampton and Portsmouth – during the pandemic, please contact our team on 01489 584298.

To find out how much you could sell your home for on the current market, why not check out our instant online sales valuation tool?

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