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How property investors benefit from budget initiatives

Posted in Property News on 08 Mar 2021

This week’s budget introduced a few new initiatives as well as extending the deadline on others – with the primary aim of boosting the economy as we ease our way out of lockdown.

STAMP DUTY HOLIDAY EXTENDED

The current stamp duty holiday, which was due to finish at the end of March, has been extended until the end of June. This means you don’t have to pay stamp duty on properties up to the value of £500,000 if the purchase is completed by 30 June 2021.

At the end of June, the zero rate will still apply on properties up to £250,000 before the zero rate threshold returns to £125,000 from October 2021.

Landlords looking to extend their portfolios will welcome this stamp duty holiday extension as they can potentially save thousands. However, property investors will still have to pay a three percent stamp duty surcharge on second homes and buy-to-let properties.

Melanie Leech, Chief Executive, British Property Federation, commented: “The stamp duty holiday has kept the residential sector moving throughout 2020 and, with recovery still insecure, an extension is the right decision. The current ‘holiday’ has illustrated what a damaging tax stamp duty is – it stops people from moving home. Our tax system should focus on where value is created and that should mean working towards low or no stamp duty.”

MORTGAGE GUARANTEE SCHEME INTRODUCED

The Mortgage Guarantee Scheme is set to be introduced in April to help buyers with small deposits.

The 95% loan to value (LTV) mortgage guarantee will be offered by listed high street lenders, including Lloyds, Barclays, HSBC and NatWest, plus Virgin Money to follow. During the pandemic, most low-deposit mortgages were withdrawn by lenders, and buyers required a deposit of 15 to 20 percent to secure a loan.

The Mortgage Guarantee Scheme will be available on new mortgages until 31 December 2022, and borrowers will be able to fix their initial mortgage rate for at least five years.

David Ross, managing director at property market analytics specialist Hometrack, said, “The reaction of lenders will determine the success of the 95 percent mortgage guarantee scheme. While many first-time buyers will welcome the opportunity to access a larger loan, it will create a barrier if lenders set high affordability tests or loan-to-income limits.”

SHARES IN MAJOR HOUSEBUILDERS RISE

After this week’s announcement by the chancellor, shares in three of the largest publicly listed housebuilders, Taylor Wimpey, Persimmon, and Barratt Developments, rose by approximately six percent.

Matthew Pratt, CEO of Redrow, commented: “Overall today’s budget gives hope for the UK’s recovery, and we welcome the boost in funding for apprenticeships, which will help encourage a vital stream of talent into the construction industry. The stamp duty holiday extension will be welcome news to those buyers caught up in the home buying process and who may have otherwise missed out on a saving, and the element of tapering between June and September will also be welcome to a number of new market entrants.”

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