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With the recent budget announcement from Chancellor Rishi Sunak, how will this affect the property market?

  • Mar 4th 2021

With the new budget announcement by Chancellor Rishi Sunak, we have summarised how this will affect the property market. The Chancellor has extended the Stamp Duty Holiday, alongside the furlough scheme, whilst introducing a new 95% Loan-To-Value mortgage and a freeze on certain tax thresholds.

Stamp Duty Holiday Extension

Since the Stamp Duty Holiday's initial announcement, the property market has been thriving over the pandemic, with more and more people looking to move to a new home. 

A shift in buyers has also taken place, with existing homeowners overtaking first-time buyers and becoming the larger sector of people purchasing a home.

The lack of mortgages available for buyers who want a higher Loan-To-Value (LTV) has also helped existing homeowners dominate the property market. 

Considering how popular the Stamp Duty Holiday announcement has been, the Chancellor has decided to extend the deadline from the end of March until June 30th 2021. where buyers only start paying stamp duty on properties above £500,000. 

Buyers are exempt from paying any tax on properties up to the value of £500,000. After June 30th, the Stamp Duty Holiday will carry on until September 30th, however, with a new tax-free threshold of £250,000.

On October 1st, the nil rate band will revert to its normal level of £125,000, with standard stamp duty rates coming into effect. 

Industry leaders and property buyers have welcomed this news. Since the Stamp Duty Holiday announcement was made, buyers have saved an average of £4,500 each, with a maximum of £15,000.

Mortgage Guarantee Scheme

Since the shift in existing homeowners overtaking firs-time buyers in property sales, the government has decided to help them by offering a new mortgage guarantee scheme, which helps buyers purchase a property with a 5% deposit!

The scheme will be available from April and will work similarly to the previous Help-To-Buy Scheme, with lenders able to purchase insurance from the government to cover some of their losses if the property is repossessed. 

The scheme aims to increase the availability of 95% (LTV) mortgages by reducing the amount of risk lenders have to take on.

Lenders currently offer a limited range of 95% (LTV) mortgages with a strict criteria to meet. The new scheme will allow buyers to purchase a property with only a 5% deposit and secure a mortgage deal for five-years if they want an attractive rate of interest. At present, lenders including Lloyds, NatWest, Santander, Barclays and HSBC have signed up for the new government scheme. 

Unlike the new Help-To-Buy Scheme, the new mortgage scheme will be available for both first-time buyers and existing homeowners, including those trying to remortgage with low equity levels in their property. Buyers will have the opportunity to purchase new and existing homes under the new mortgage scheme.

The scheme comes with some restrictions, including that a property must cost less than £600,000 and be your primary residence and not a buy-to-let property or a second home. 

Capital Gains Tax

With several tax thresholds being frozen, the Chancellor has also added some benefits to Capital Gains Tax (CGT) and inheritance tax, which will be frozen until April 2026. 

Currently, the CGT threshold stands at £12,300 per person. Couples can combine their CGT allowance to £24,600 for the tax year 2021/22, with the inheritance tax threshold remaining at £325,000. 

Furlough Scheme

The Chancellor has also extended the furlough scheme until the end of September. Employees covered by the scheme will continue to receive 80% of their salary for hours not worked. However, in August and September, employers will have to make a contribution. 

For self-employed people, their support will also continue until the end of September, through two grants equivalent to 80% of three months' average trading profits, capped at £7,500.

The furlough and self-employed schemes aim to help homeowners and renters continue receiving an income to carry on with their mortgage and rent payments if they cannot work.

With the government's continued support after the new budget is announced, the property market is expected to continue to thrive. 

Whether you are considering buying or selling your property, speak with one of our property professionals today by calling us on 0116 266 9977!

 

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