How the Spring Budget announcements will impact homebuyers

In the Spring Budget, the Chancellor of the Exchequer, Rishi Sunak, announced a number of measures impacting the UK property industry and homebuyers, in addition to providing financial support for workers, employers and businesses.

During the budget statement, an extension to the stamp duty holiday and a new mortgage guarantee scheme were announced. Both measures are positive news for many homebuyers.

Stamp duty holiday extended

In England and Northern Ireland, the stamp duty holiday was set to end on the 31st March 2021. There had been calls for the government to extend this as hundreds of thousands of buyers and sellers were worried they wouldn’t be able to complete their property purchases by the deadline.

Now, the stamp duty holiday has been extended by three months until the end of June. This will help many buyers and sellers complete in time to take advantage of the tax savings. 

Tim Bannister, resident property data expert at Rightmove, says: “This three-month extension will come as a huge relief for those people who have been going through the sales process since last year and were always expecting to make use of the stamp duty savings.

“Our recent data shows one in five sales that were agreed in the same month the stamp duty holiday was first announced in July last year still haven’t completed, so this additional time will make a big difference to help those stuck in the logjam complete their purchase in time before the new end of June deadline.”

Stamp duty tapering period

For those that miss the new deadline, there will be a tapering period in hopes to avoid a complete “cliff edge”. At this point, the stamp duty threshold will be moved from £500,000 to £250,000 from 1st July until the end of September. Starting in October, the stamp duty threshold will then be moved back to properties above the value of £125,000.

The stamp duty holiday has provided a unique opportunity for homebuyers. And with the tapering end to the holiday, this could allow more buyers and investors to take advantage of some savings.

Tim Bannister states: “Buyers who have recently agreed a sale now have a race on their hands to see if they can also make use of the stamp duty savings, but many with purchases over £250,000 will find that time is too tight to complete before the end of June and so shouldn’t be factoring this into their purchase.

“It’s worth remembering that the average savings vary massively around England, and first-time buyers will still be exempt if they’re buying for £300,000 or less. There are also many other reasons people are choosing to move, evidenced by the strong buyer demand Rightmove has already seen in the first two months of the year.”

Mortgage guarantee scheme announced

From April, a new mortgage guarantee scheme will help homebuyers seeking 95% loan-to-value mortgages. Unlike the Help to Buy scheme, the mortgage guarantee will be available to first-time buyers and current homeowners on any property worth up to £600,000 not just new-builds. 

Mortgages with smaller deposits are seen as higher risk. Since the beginning of the coronavirus pandemic, mortgage deals with 5% deposits have practically disappeared. Mortgage availability is returning across the sector. However, there are still very few mortgages with 5% deposits available. And with savings account interest rates at record lows, this has made it more challenging for buyers to save up for deposits.

Through the mortgage guarantee scheme, the government will offer incentives for lenders who allow buyers with smaller deposits to borrow and will guarantee portions of the loans. Borrowers will even be able to fix their initial interest rate for at least five years if they wish to.

The government has announced the mortgage guarantee scheme in hopes to help more younger people step onto the property ladder. It is expected to predominately help first-time buyers and will improve mortgage availability for borrowers with smaller deposits. It will also give an added boost to the property market.

Keep in mind that buyers will still need to meet standard affordability checks to secure mortgages through this scheme. Currently, most lenders will only allow buyers to borrow up to 4.5 times their annual salary, according to This is Money. It is recommended to speak with a mortgage adviser or broker to help you find the best mortgage for your personal and financial circumstances.

Posted on 4th March 2021