This week, the Chancellor presented one of his most important Budgets in recent history, outlining plans for the country’s post-pandemic recovery. Thanks to the vaccination programme, the UK can start to look beyond COVID 19 and the Westminster Budget did just that with a number of new measures and extension of support schemes announced to help businesses and jobs, and well as support to aid the crucial long-term economic recovery.
But, what was of key interest to us here at the Home Report Company was, of course, changes that affect the property industry and what this means for you.
Mortgages
The Chancellor said “We want to turn Generation Rent into Generation Buy” and with that a reincarnation of the Help to Buy mortgage guarantee scheme was announced. This new 2021 version incentivises lenders to offer small deposit mortgages, making home ownership more accessible. It is not thought to apply to investment purchases.
Lenders have been withdrawing low-deposit mortgages for some time, making it more challenging for people to get on the property ladder – or make that next leap up. To address this, the Government has confirmed plans to guarantee 95% loan-to-value (LTV) mortgages, which could help first-time buyers get on the property ladder or for that move up. These mortgages will also likely benefit home owners looking to re-mortgage to release equity.
Specifically, it will underwrite 95% LTV mortgages on properties worth up to £600,000, with deals available from April from a lengthy list of lenders – a stark change from the circa eight small deposit mortgages available across the whole market in January this year. Some lenders – including Lloyds, Santander, Barclays and HSBC – have already been announced, with others coming soon.
As I revealed earlier, refreshingly these mortgages won’t be restricted to first time buyers or new build homes which opens up opportunities for people already on the property ladder to make their next move – upsizing or moving location to a more expensive home. I suspect this will further bolster the already buoyant property market in Scotland and we’ll see a surge in properties go on the market as people make their next move. If you’re looking to move up the property ladder, now is the time to get prepared.
But one thing to bear in mind is that low-deposit mortgages tend to have higher interest rates, and property prices also remain high, so some buyers could struggle with affordability.
A stamp duty extension
Whilst it was announced just last month that the stamp duty holiday ends 31st March in Scotland, the Chancellor revealed an extension in England until 30 June. This will be welcome news to many home buyers and sellers South of the Border – not to mention the property industry as a whole, as the pressure is off to meet the 31st March deadline.
But what does this mean for Scottish property buyers and sellers? Sadly, nothing – Scotland’s Finance Secretary Kate Forbes has confirmed she won’t follow the Chancellor and extend the LBTT tax relief beyond the end of this month. She was quoted saying:
“We’ll stick to the original plan that was clearly set out. It was intended to support the recovery of the residential property market this financial year; that has been achieved.”
Instead, Kate Forbes has focused on extending the 100% relief on non-domestic rates alongside freezing council tax.
And so, the Land and Buildings Transaction Tax (LBTT) threshold reduction in Scotland will drop from £250K back to £145K at the end of the month. Like many other professionals in the industry, I remain hugely disappointed at the news as the stamp duty holiday created a much-needed boost to the
Scottish property market and purchasers.
The Scottish economy is going to take some time to recover and, in the property market, conditions are likely to remain challenging throughout the year. Which is precisely why the Chancellor has made the decision to extend the stamp duty holiday. The reduction in LBTT resulted in significant increases in revenue for the Scottish Government in what has been a time of severe economic decline. And, as the country plans for post-pandemic recovery, it needs every bit of financial support it can get.
