After a year of the furlough scheme, increased Universal Credit payments, and shrinking GDP, it was no surprise UK Chancellor Rishi Sunak set out to claw money back in the Budget – mainly by increasing corporation tax and freezing tax thresholds.
More surprising – and in a good way – was the generosity he offered to homebuyers and homeowners. His goal, he said, is to turn “‘generation rent’ into ‘generation buy’”.
Something particularly welcome is the action the Government has taken to make 95 percent loan-to-value mortgages more common. Up until the Covid-19 pandemic last year, homebuyers could access a greater range of mortgage products that allowed a deposit of just five percent of the cost of their new home. Lenders would then lend the difference as a mortgage.
However, that ended when the pandemic hit, and it became extremely difficult for homebuyers to get anything more generous than a 90 percent mortgage as providers reduced the range of products available. This led to the lowest proportion of sales to first-time buyers since 2016.
From now on, the Treasury will offer lenders a guarantee on part of the debt on mortgages for First Time Buyers purchasing a home up to £600,000The aim is to encourage buyers to save up for a more manageable deposit and incentivise mortgage providers to lend.
The second positive initiative was the extension of the Stamp Duty ’holiday’. If you’re not familiar with it, Stamp Duty Land Tax (SDLT) is an additional tax you pay when you buy a property in England or Northern Ireland.
For homebuyers in England, the holiday extension will run until 30th June this year, meaning the threshold at which you start paying the tax – at five percent – remains at £500,000. From the 1st of June until the end of September, an interim threshold of £250,000 will then be in place. Then, from 1st October, it will revert to £125,000.
In Wales, the Land Transaction Tax threshold remains at £250,000 until it returns to the previous level of £125,000 on June 30th. There’s no news from the Scottish Government on their plans yet.
According to The Times, the move is vital to keep the housing market functioning. “With almost 600,000 people in the process of buying, it was feared that thousands could miss out on the savings… with up to one in five buyers saying they would consider abandoning purchases if they missed the [March 31st] deadline.”
One final bit of news: leaseholders – who pay ‘ground rent’ to the ‘freeholder’ that owns the property (say, a block of flats) and the land it’s built on – will no longer have to pay ground rent when they extend their lease. Homeowners can also extend the lease for up to 990 years, a big increase on the previous level of 90 years. Something that will make it easier to sell their home when the time comes.
With these Government incentives in place, purchasers should be able to proceed with their home-buying plans more easily. If you need advice on how to make the best use of these Government incentives, then speak to one of our advisors today.
