The UK government has extended the stamp duty holiday
After pressure to extend the tax relief so buyers can complete ongoing transactions, Chancellor Sunak has announced that the stamp duty holiday on house purchases will indeed be extended for another three months. The current holiday was introduced last July as a way to help alleviate buyer stress stemming from financial hits related to the global pandemic, as well as to give the property sector a boost amid lockdown. From July 1 2021, however, the holiday will apply only on properties up to £250,000 until the end of September.
The BBC reports that the extension may also likely kick-start further enthusiasm for buying and selling again as the UK heads into the warmer spring months, while also “retaining current buyers who were going to pull out of the house purchase process”. According to Rightmove, there are currently over 620,000 home sales in process. Should a further 300,000 transactions make it through given the new extension, it could mean savings of up to a collective £1.75 billion - a very real possibility as experts have noticed new post-pandemic buyer priorities shifting towards homes with more garden and outdoor spaces.
However, announcements were also made for a new ‘mortgage guarantee’, whereby the government guarantees 20% of the mortgage, and the buyer only puts up 5% on homes with a value of up to £600,000, saying the scheme will allow more people to become homebuyers.
While it’s promising news for homebuyers, some experts are worried about over-burdening the system, with Yes Homebuyers founder questioning a government that ‘chooses to intensify an already serious issue by repeating the exact cause of the issue in the first place’.
Other issues that may arise include:
- Banks not wanting mortgages that default because of how much the process will cost them, even if the government steps in as guarantor.
- Banks may still issue virtually the same ‘total rate’ to avoid sub-prime high-risk applicants applying for these highly leveraged government-backed mortgages.
- There may soon be a decrease in the amount of high-leverage mortgages available that are also affordable to those with low-deposit, low-income budgets (the party that the scheme is designed to help) as banks will most likely adjust the rate to reflect risk accordingly.
For more on what customers are looking for from their agent, read our recent blog on keeping your sellers happy.
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