Mortgages made easier
Today, the Chancellor, Rishi Sunak, announced the details of his spring budget in Parliament, setting out the government’s plans for taxation and spending for the next year.
Two big policies especially relate to homebuyers and sellers. Here’s Habito’s take on what you need to know.
The stamp duty holiday, which was previously set to end on 31 March, has been extended for a further 3 months, until the end of June. So, zero stamp duty now applies for buying a property up to £500,000 that you’ll use as your main residence, all the way up to 30 June.
From 1 July to 30 September, stamp duty relief will be tapered. There’ll be no stamp duty on properties worth up to £250,000. For properties above this, stamp duty will apply. And second-home buyers and buy-to-let landlords will still have to pay the 3%+ tax after 30 June.
From 1 October, full stamp duty rates will be reinstated (which apply on all homes over £125,000). However, first time buyers will still only be required to pay the tax on homes over £300,000. See all the different stamp duty bands here.
Is this good news?
Average home buying timelines have gone up by several weeks due to Covid and the extra demand on surveyors because of the tax holiday. This deadline extension should give homebuyers and movers who are currently in the process more confidence that they'll make it in time and not end up with an unexpected tax bill (though it’s still not a guarantee). If you were worried about making the previous deadline, this should be a welcome update – you’ve now got three more months to complete to make the full saving on stamp duty tax.
What about buyers who haven’t started yet?
The holiday deadline has only been extended in its current form for three more months. Then it will only kick in for properties worth over £250,000 from 1 July, until 30 September. While it’s possible you could buy a home from start to finish if you started the process now, unfortunately it’s not a guarantee.
If you are looking to buy before stamp duty resumes in full, on 1 October, think carefully about your budget. If you didn’t meet the new stamp duty holiday deadline and had to pay the full amount of tax, would you still be able to afford it? If you’re able to set the extra money aside just in case, there’s likely no reason not to go forward. Otherwise, you might want to wait, or adjust your house budget to allow for the possibility of missing the deadline.
What’s the story?
The government has announced today that it will be backing lenders to offer mortgages at 95% loan-to-value (LTV), which are deals for those with a 5% deposit.
Why is this important?
Since Covid, many banks and lenders have withdrawn their lower-deposit mortgage deals, because they’re considered the most risky.. This meant a lot of young people hoping to get on the property ladder for the first time who needed those smaller-deposit deals because of smaller deposits, were temporarily frozen out of buying their first home unless they managed to find more money.
So, can I get a 95% mortgage now?
We know that 95% mortgages will be available for homes worth up to £600,000, starting in April, from several big named lenders, including HSBC, Barclays, Lloyds and Natwest, with Virgin joining later on. They'll also be available for all property types, not just new builds. That said, the full details of the scheme haven’t been released yet, and each lender’s criteria for the loans could be slightly different.
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