Budget 2021 Announcements That Affect Homebuyers

Posted 3 March 2021 by Keith Osborne

The Chancellor has today confirmed details of schemes for the Stamp Duty holiday and 95% mortgages...

Today’s much-anticipated Budget statement from Chancellor Rishi Sunak has included a number of issues with a direct affect to buyers and house-hunters.

There has been some speculation and predictions in the run up to today’s announcements but only now have the details been confirmed.

Stamp Duty

The Stamp Duty holiday deadline has been extended from 31 Match 2021 to 30 June 2021. This means that buyers of properties priced up to £500,000 will pay no Stamp Duty if they complete their purchase by the deadline date.

From 1 July, the property price cap for 0% Stamp Duty will be £250,000 until the end of September 2021, when it will fall to its old limit of £125,000.

Stamp Duty rates for owner-occupiers until 30 June 2021

Property or lease premium or transfer value SDLT rate
Up to £500,000 Zero
next £425,000 (the portion from £500,001 to £925,000) 5%
next £575,000 (the portion from £925,001 to £1.5 million) 10%
remaining amount (the portion above £1.5 million) 12%

 

Stamp Duty rates for additional properties until 30 June 2021

Property or lease premium or transfer value SDLT rate
Up to £500,000 3%
next £425,000 (the portion from £500,001 to £925,000) 8%
next £575,000 (the portion from £925,001 to £1.5 million) 13%
remaining amount (the portion above £1.5 million) 15%

 

Mortgages

The government is introducing a mortgage guarantee scheme to encourage lenders to offer home loans that require only a 5% deposit. Already, a number of major lenders have signed up to this scheme, with more expected to follow.

 

The property industry has reacted to these announcements:

Phil Bayliss, CEO of later living at Legal & General, commented: “As Britain emerges from the pandemic over the coming months, extending the Stamp Duty holiday will help sustain a strong property market amid the worst economic downturn in 300 years. Importantly, the extension ensures a more efficient use of Britain’s existing housing stock can continue, by incentivising older homeowners living in larger properties to downsize. These homes can be put to much better use by first-time buyers and growing families but, at present, nearly nine million bedrooms in the homes of older people are lying empty. Ultimately, we hope that the holiday might one day inspire the scrapping of the levy altogether. Not only would this inject much-needed liquidity into the market, it would also help first-time buyers, second-steppers and young families climb up the property ladder.” 

Eugene Marchese, co-founder and director at Guild Living, commented: “While the Stamp Duty holiday extension will help sustain momentum in the housing market, the reality is the government is only kicking the can down the road when it comes to rethinking one of Britain's most economically damaging taxes. Numerous studies have revealed Stamp Duty to be a major barrier to downsizing, and in turn, a more efficient use of Britain's existing housing stock. Moreover, a permanent extension of Stamp Duty threshold could also drive tens of thousands of new property transactions each year, leading to new tax revenues of between £2.3billion and £4.1billion a year — a surplus of up to £139 million for the Treasury’s coffers. If the Chancellor is looking for a low-cost policy that would keep activity in the housing market going and bring a host of social and economic benefits, he should look to exempt last-time buyers from paying Stamp Duty."

Kevin Stevens, director of E5 Living UK, said: “There’s no doubt that this will bring new confidence to the market, particularly amongst first-time buyers. A return to 5% deposits will open up home ownership to a whole generation who would have otherwise been unable to get on the housing ladder. The Chancellor has recognised that people are understandably feeling cautious and whilst the Stamp Duty holiday will have an immediate positive effect, the need for a lower deposit will provide a stronger foundation for a more sustained improvement in the housing market.”

Simon Nosworthy, head of residential conveyancing at Osbornes Law, said: “The extension to the Stamp Duty holiday is the saving grace homebuyers who were going to miss the March 31st deadline have been hoping for and will save thousands from having to pay the tax. It will also continue to help keep the housing market buoyant as many look to take advantage of the tax relief. On the downside the extension is storing up bad news for other homebuyers down the line, even with the interim period of no Stamp Duty up on transactions up to £250,000 until the end of September. This holiday rejuvenated the market but also created an artificial bubble that will have to burst at some point. It would have been advisable for the Chancellor to have put the market out of its misery sooner and let the holiday end, rather than prolonging the inevitable cliff edge. The government’s introduction of the mortgage guarantee scheme will answer the prayers of many wannabe home buyers who have struggled to save enough for a 10% deposit, while house prices increased dramatically beyond their budgets. This announcement gives thousands a glimmer of hope that they can realise their dream of owning a property. However, the downside of this is that the scheme could further fuel the constant increase in house prices, while if there is a crash in the housing market it could leave many people in negative equity.”

Mark Peck, director, Cheffins, said: “Whilst the extension to the Stamp Duty holiday will be welcomed for those with property sales already agreed, the government here is simply kicking the can down the road with chaos set to ensue once the tax break comes is reduced in June and tapered until September. The pressure on the property industry since the announcement of the Stamp Duty holiday has been immeasurable and this extension will simply continue to add to the strain already being felt by both buyers and sellers as they look to complete on sales before the end of the tax break. Whilst the Chancellor has attempted to manage this with the tapering system until September, the property industry will need to brace itself for further pandemonium throughout the summer months. The property industry has long been a marker for the overall health of the economy and ensuring that transactions continue will encourage more spending on a wider scale as well as alternative investment decisions as the UK looks to follow its ‘roadmap to recovery,’ however, the impacts once Stamp Duty is reintroduced could be major, and these will remain to be seen from September onwards.”

Nicky Stevenson, managing director at national estate agent group Fine & Country, said: “That sound you just heard was hundreds of thousands of people all breathing a collective sigh of relief. Legions of Britons will now be toasting the Chancellor’s decision. The loss of a £15,000 tax break would not have proved a deal-breaker for wealthier buyers in and of itself. However, they would have come under pressure to drop their price from further down the chain. For first-time buyers, who are integral to a well functioning housing market market, a few thousand pounds can make all the difference when stretching for a deposit.”

John Phillips, national operations director, Just Mortgages and Spicerhaart, said: “The extension to the furlough scheme is arguably the most important announcement for the housing market. This addition of stability will certainly help lenders, brokers and clients as we head towards normality. The light is beginning to shine at the end of the tunnel and once the country reopens, having an extra few months for the economy to recover will hopefully ensure a strong and quick bounce-back. The extension to the Stamp Duty holiday will also encourage activity. However, with the already full pipeline, buyers will need to move quickly to get deals over the line. When we do approach the end of the holiday, there will be a slight dip in activity, however the incredible appetite in January and February demonstrates that the market will continue to move regardless. The introduction of government backed 95% LTV mortgages will help those with smaller deposits get onto the ladder. This is an extremely welcome introduction, and the chancellor indicated that some lenders will be able to transact these loans next month, which will help the housing market continue to thrive.”

Nick Sanderson, CEO, Audley Group, said: “The Stamp Duty holiday has succeeded in some parts of the housing market but not all of it. Yet this Budget focuses on targeted measures at the wrong end of the market. 95% mortgages will primarily benefit first-time buyers. But there is no support for those downsizing or moving into housing with care. Supporting this end of the market would have a significant impact on the whole housing market, but has been largely neglected. This is a missed opportunity.”

Kevin Shaw, group managing director of residential sales at property services company LRG [Leaders Romans Group], said: “At the moment, the property market is set to be stronger than initial forecasts have suggested and we expect Q2 to perform well. The Stamp Duty Holiday extension will certainly help with this, enabling buyers who didn’t get through in time to still take advantage of the reduction in Duty. While there is still the opportunity for buyers to move and take advantage of the reduction, it’s also important that anyone looking to sell starts the process now to have any hope of completing before the new deadline.”

Sarwjit Sambhi, CEO of St Modwen Properties, commented: “This extension should go some way in alleviating the anxiety the cliff edge has caused for homebuyers across the country, and we welcome the phased reduction to October to avoid another administrative bottleneck come June. The high levels of demand the property market is currently experiencing shows the impact this tax can have on both first-time buyers’ and homeowners’ ability to move, which begs the question as to whether evolving or potentially scrapping Stamp Duty should be next on the agenda. We’ll wait to see how the new mortgage guarantee scheme performs in helping first-timers get their foot on the property ladder but any stimulus is welcome. If it helps people buy their first home then hopefully it is enough to keep the market moving once both the Stamp Duty holiday and the furlough scheme come to an end later this year.”

Brian De’ath, managing director of residential sales at Canary Wharf Group, commented: “The details of the Chancellor’s Spring budget have been discussed and speculated upon ad infinitum, so it’s a relief to finally be able to see what plans Rishi Sunak has in store for the property industry. The extension to the Stamp Duty holiday will undoubtedly have a positive impact on the Spring market, ensuring current sales do not fall through and encouraging those who may have been thinking about purchasing to finally do so. This in turn will provide a boost to the wider economy through the many industries involved in the property market. Low-deposit mortgages had disappeared from the marketplace over the last year, as a result of the pandemic, so it’s great to see a new 95% mortgage announced. The Government-backed  scheme will increase movement across the entire market by helping many people onto the property ladder for the first time.

Paul Cosgrove, director at Finlay Brewer comments: “Following the Prime Minister’s roadmap out of lockdown and the fantastic rollout of various vaccines, it’s brilliant to see the fiscal stimulus announced in the Chancellor’s budget. It shows that the UK is ready to take a seat at the table and get down to business. The extension to the Stamp Duty Land Tax holiday is something to be jubilant about. As we saw when the holiday was first announced last year, the number of transactions increased dramatically. An extension to the holiday ensures that activity remains strong, allows for completions to go ahead and provides much-needed revenue for the treasury after a difficult financial year of colossal spending. We also welcome the 5% deposit mortgage announced in the Chancellor’s budget for first-time buyers. The criteria for securing a mortgage has been very stringent and the number of 10% mortgages available in the last year fell off a cliff. This additional help for first-time buyers will provide a boost to the wider UK market, as their purchases ascend up the property ladder and keep up momentum.” 

Karrina Oki, director of sales and marketing at Pentland Homes, commented: “The Stamp Duty holiday extension is fantastic news for not only first-time buyers, but for downsizers, upsizers and second-steppers alike. It provides positive long-term benefits to the market, encouraging more movement with a range of buyers, whilst also providing a boost to housebuilding. It also provides security to those purchasers who were concerned about completing ahead of the original deadline at the end of March. Additionally, the 5% deposit mortgage will help provide the boost needed for numerous young first-time buyers to get onto the ladder, as well as helping those older people with stable incomes who have been unable to save large deposits.” 

Sean Ruane, sales director at Joseph Homes, commented: “I would urge those looking to make a move before the updated deadline to consider purchasing a new build home, as they are renowned for their faster transaction period. This is the most prudent move for buyers looking to take advantage of the renewed Stamp Duty holiday extension and maximise on savings. As a developer, our main priority is to complete sales efficiently, allowing a smooth process with minimal stress for buyers.” 

Olivia Harris, chief executive of Dolphin Living, said: “It is more important than ever that those working within these industries, and our city’s vital key workers, have access to housing which is both affordable and located close to their place of work. Therefore, we are calling on the Chancellor to commit to a once in a generation expansion of affordable housebuilding within London. This must include a significant proportion of intermediate rental housing for those critical workers who are unable to afford local market rents upon whom London relies, as part of the overall pledge to support the capital’s social and economic recovery post the pandemic and level-up the city.”

Bruce Burkitt, managing director at Property Experts, commented: “Today’s budget could well be the most important in the post-war era. We welcome the Chancellor’s decision to create a pathway to support first-time buyers who are seeking to get on the property ladder. The extended Stamp Duty holiday and 95% mortgage guarantee should serve as two effective mechanisms to ignite momentum in the market. One thing we learnt from the initial Stamp Duty holiday was that people do want to move, especially at the lower end of the market. However, the cost required alongside a deposit is a big financial ask, especially in today’s economic climate and proportionally far more than previous generations faced. Hence, the introduction of mortgage reforms, we hope, will further stimulate the benefits of the Stamp Duty holiday.”

Antony Crovella, sales and marketing director at Meyer Homes, commented: “It’s great news to hear that the Stamp Duty holiday has been extended. With recent issues with the deadline and delays with lawyers and so on, we had a couple of buyers who were looking to pull out if they missed the deadline, so this will now mean they can still look to progress with the sale.”
 
Stephen Wicks, Inland Homes CEO, commented: “We welcome the continued support for the housebuilding and construction sector in today’s Budget, recognising the importance of the industry to support economic growth as we move out of lockdown. Both the Stamp Duty holiday extension and support for 95% mortgages are very welcome short term measures. However, the UK continues to suffer from a chronic undersupply of housing and the unintended consequences of the measures announced today may fuel an artificial buoyancy in the housing market that is not sustainable. To really speed up the delivery of new housing, we need longer term planning reform. The government needs to act quickly and invest to speed up the whole process to give us the platform to address the housing crisis.”  

Greg Hill, deputy chief executive, Hill Group, commented: “The Chancellor’s Budget clearly demonstrates the government’s commitment to helping people onto the property market and into their own home. The Stamp Duty extension will not only help buyers currently caught in the completion trap, but also give a window of opportunity to additional buyers looking to move. The launch of the government-backed 95% LTV mortgage scheme significantly reinforces this commitment by opening up the market to hundreds of thousands more buyers, offering an essential route to homeownership at a critical point in this country’s recovery from the pandemic.”

Jeremy Montagu-Williams, sales and marketing director for Montreaux, commented: “The news today from the Chancellor offers even greater stimulus for the housing industry. Rumours have been rife for a couple of weeks on the Stamp Duty holiday extension and it is pleasing to have seen them come to fruition. The new government loan to value mortgage is also well received. In the past year the banks have been reluctant to offer 5% deposits and this has held many first-time buyers back; this new scheme offers the hope of home ownership to thousands of people that have been excluded for quite some time or those who are no longer eligible to use Help to Buy.”

Tim Nutt, residential managing director at Shanly Homes, commented: “It’s excellent news that the Chancellor has announced extra help for the property market in the Spring budget. The extension to the stamp duty holiday spells good news for many homebuyers that were worried they would not be able to complete on their property by the March deadline, due to a magnificent demand. The 5% mortgage scheme will also add some reassurance to first-time buyers who are looking to get a foot onto the property ladder, but are struggling with securing a lender.”

Katy Jordan, managing director at Storey Homes, commente: “As a SME housebuilder committed to delivering much needed quality new homes and improving people’s lives, we fully welcome today’s announcements. Extending the Stamp Duty holiday coupled with lowering the threshold for a further period will help unblock the housing market considerably and support families and first-time buyers to progress up and onto the housing ladder. Homes continue to play an integral part of our security and future, so championing those who have not quite managed to make that first step with 95% mortgages provides further hope and a much needed practical boost that will make a difference. Without first-time buyers, the market becomes stagnant, so giving them the confidence to achieve home ownership will also stimulate the market long term.”

 

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