Stamp Duty Land Tax Holiday Extended

The March 2021 budget has provided a massive boost for the UK housing market, with an extension to the Stamp Duty Land Tax holiday and a government guarantee on 95% mortgages, helping more first time buyers on to the property ladder, which is likely to fuel house price growth.

Stamp Duty Land Tax Holiday Extended

The March budget saw the widely anticipated extension of the government’s Stamp Duty Land Tax holiday. In England and Northern Ireland, the threshold for Stamp Duty Land Tax will remain at £500,000 until 30th June.

From the 1st July to the 30th September, the threshold will be reduced to £250,000, and then returning to its original level of £125,000. Dropping the threshold to £250,000 until September will mean that more than 50% of buyers in England will pay no stamp duty, compared with 94% now and 16% from October.

Rishi Sunak said that the stamp duty holiday had “helped hundreds of thousands of people buy a home and supported the economy at a critical time”, however, due to backlogs with purchases, many would not complete before the original deadline of 31st March. This phased change will mean that property transactions that were delayed will now not incur the higher bill for SDLT, potentially saving thousands of transactions from falling through.

Buy-to-let property investors are keen to use the extension to increase their property portfolios with 61,800 buy-to-let properties completing in Q4 2020, the highest quarterly figure since 2017; therefore, with the extension, we could see more sustained growth in buy-to-let investments in parts of the country where property prices are lower, for example in cities such as Manchester, Liverpool and Sheffield.

This cost saving is likely to be pumped back into the economy, with many home buyers and buy-to-let landlords planning property improvements, using the money that they have saved.

Government Guarantee on 95% Mortgages

Rishi Sunak also announced that the government would provide a guarantee for mortgage lenders to encourage the return of 95% mortgages, which will be in place from April 2021 until the end of 2022.

Lloyds Bank, NatWest, Santander, Barclays and HSBC have already signed up to the scheme and more, including Virgin Money, planned to follow suit.

The mortgage guarantee scheme will apply to homes with a purchase price of up to £600,000 and is not restricted to first-time buyers, or people who are moving. As part of the scheme, lenders will be obligated to offer five-year fixed-rate mortgage deals, providing borrowers the opportunity to fix their monthly repayments.

At the start of the pandemic in 2020, lenders withdrew their 95% mortgages, capping borrowing at 90% with stricter terms and conditions, which was a major blow to first time buyers who were benefiting from the Stamp Duty holiday, but were unable to fund the 10% deposit for their purchase. The combination of both the SDLT holiday extension and the mortgage guarantee scheme will increase property transactions, creating a more buoyant housing market in 2021.

Lloyd Cochrane, Head of Mortgages at NatWest Group commented, “For those customers with smaller deposits looking for a mortgage, particular younger or first time buyers, saving up for a big deposit can often be difficult, and we know people in these groups are some of the hardest hit by the effects of the pandemic. A government-backed mortgage guarantee scheme will help segments of the market for whom home ownership has felt far out of reach in recent months.”

The changes immediately saw a boost to the share prices of housebuilders, including Barratt Developments and Persimmon ending the day as the biggest gainers in the FTSE 100 with 7% rises. Taylor Wimpey closed up 6% and in the FTSE 250 Crest Nicholson, Countryside and Bellway saw gains of more than 6%.

Stamp Duty Holiday Buy-to-Let Opportunities

Stamp Duty Land Tax is calculated at the rate on the date of legal completion and not the date of exchange of contracts, so if you are considering an off-plan purchase, you need to check the date of completion to determine the Stamp Duty Land Tax that you are likely to pay.

• Birmingham buy-to-let property investments from £195,000

• London Commuter buy-to-let property investments from £235,000

• London Commuter buy-to-let property investments with 6% returns guaranteed

• Sheffield buy-to-let property investments from £85,000 with 8% returns guaranteed

Regency Invest also offer off-market property investment opportunities. Click here to let us know what your requirements are.

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