Chancellor Rishi Sunak announced plans for a three-month extension of the stamp-duty holiday, and a new mortgage support scheme in his latest budget. The measures will be welcome news for property investors and the conveyancing industry, who feared that the housing market would ‘fall off a cliff’ at the end of March.
The surge in demand created by the stamp duty holiday, which began in July 2020, has caused a bottleneck in the system, with mortgage brokers and conveyancers struggling to keep pace with transactions as buyers take advantage of the opportunity.
The three-month extension will allow those already underway with their property purchase to benefit, while not being long enough to create a new surge in demand. For the time being, it is expected to maintain the elevated house prices which are recorded throughout much of the country.
Another piece of good news for the housing market was revealed in the March budget. The government will provide a guarantee on 95 percent loan-to-value mortgages, which will help many more potential first-time buyers take the first step on the property ladder. The scheme will run until December 2022, and will support fixed five-year mortgage rates.
Several high street lenders are participating in the scheme, including Lloyds, Barclays, HSBC and NatWest. The lower risk undertaken by lenders could also mean lower repayment costs for borrowers, by as much as £165 per month.
Property market analyst Hometrack has expressed concerns that the 95 percent mortgages will be harder to access for those living in areas with higher house prices, such as London. Managing director David Ross comments:
“The reaction of lenders will determine the success of the 95 per cent 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.”
Whatever the final outcome of the new schemes announced in the budget, it is hoped that as the economy reopens sooner than expected, the feared cliff-edge collapse of the property market has been averted.
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