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Budget update: Chancellor announces tapered Stamp Duty Holiday extension and Mortgage Guarantee scheme

  1. 03 March 2021
  2. By Jeremy Greer

Chancellor Rishi Sunak announced a 3 month extension to Stamp Duty Holiday as well as the introduction of a new scheme to help home buyers.

In his 3rd March budget announcement, Chancellor Rishi Sunak gave details of a new scheme designed to help home buyers who can only afford a 5% deposit, the Mortgage Guarantee Scheme. He also gave clarification on the extension of the Stamp Duty Holiday that has been in place since July 2020.

Mortgage Guarantee Scheme

Lenders who provide mortgages to home buyers who can only afford a 5% deposit, will benefit from a government guarantee on those mortgages. This means more lenders will feel confident in offering home buyers a 95% mortgage, allowing those with lower incomes/ less savings the ability to get onto the property ladder.

This will be particularly beneficial to First Time Buyers, who dropped by 12 in the UK in the second half of 2020. Saving a larger deposit has been a classic issue for those would-be buyers who don’t have access to ‘the bank of mum and dad’ and this scheme may help them get on the ladder. It will be interesting to see the interest rates attached to these mortgages, and the relationship with house prices, as typically lenders have been wary around higher LTVs and buyers potentially falling into negative equity.

Stamp Duty Holiday Extension

The Stamp Duty Land Tax Holiday was introduced in July 2020, and was due to end in March 2021. The holiday meant that Stamp Duty did not have to be paid when purchasing any property worth under £500,000. Due to the increased demand for houses, as well as the effect of the COVID-19 pandemic, many purchases have been stalled or delayed, meaning that many buyers were concerned that they would not complete before April, and would miss the holiday.

Now the Stamp Duty holiday on properties under £500,000 will continue until 30th June. After that the holiday will only apply to properties worth less than £250,000 until the end of September, when the holiday will end entirely. This will allow those whose purchase has been delayed to continue to take advantage of the holiday. New buyers wishing to buy cheaper homes (under £250,000) before September, now also have the opportunity to save.

It’s also worth being aware that this currently only applies to England - Wales have now confirmed they will extend the LTT holiday until the end of June 2021.

reallymoving CEO Rob Houghton said: “In tapering the holiday, the Chancellor has rightly acknowledged the vital role of the housing market in keeping the economy moving over the next few months, while the vaccine roll out is completed. The world will be a very different place in October, which will be the right time to withdraw this measure.”

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JA on 18/11/2022

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