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Properties Articles

The Spring Budget, Mortgage Loans & The Stamp Duty Extension

Rishi Sunak introduced the Spring Budget on March 3rd, with attempts to turn ‘generation rent’ into ‘generation buy’. 

For years, it has been stated that it is virtually impossible for young people to purchase property for the majority of their life, particularly in London. Sunak seeks to resolve this through new government introductions. These include the extension of the stamp duty holiday & a new budget scheme bringing back the 95% mortgages. 

Due to the financial insecurity the country has faced during the coronavirus pandemic, 5% mortgage deposits have virtually disappeared. Compared to the 391 in March 2020, 2021 saw only 5 95% loan-to-value mortgage products. 

Banks & Building Societies have been reluctant to lend as many people have faced the loss of jobs or reduced finances. To instigate a revival of the 95% mortgage loan, the government is offering a guarantee on the 80% to 95% portion of the loan. If payments cannot be made by the borrower, the government will cover that portion of the lenders losses. This scheme will begin in April, running till the end of 2022. Lenders have been advised to offer a five year fixed rate for the deal. 

Many large banks have already claimed they will be offering these mortgages. This scheme should encourage property purchases as the upfront monetary investment has been reduced. It has been predicted that interest rates on these mortgage deposits should be around 4% but this has yet to be confirmed.

Eligibility for this scheme is restricted, excluding second home buyers, buy to let and on purchases £600,000 or less. The borrowers will also require a credit check to be entitled to the scheme. 

The Stamp Duty Holiday has also been extended until the end of June. The first £500,000 spent on property is currently tax free, allowing savings up to £15,000. From June to September, this threshold will reduce down to £250,000 and then return to the normal level of £125,000 following that.

At the beginning of June, first time buyers will receive a separate threshold of £300,000, hopefully encouraging purchasing of property rather than the rental.

Although this new extension is in place, it will predominantly be needed for the completion of current purchases. It is unlikely that buyers can take advantage of this extension unless they are, ultimately, a cash buyer.