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Will the new 95% mortgage scheme and stamp duty extension boost house prices?

LATEST NEWS | 10.03.2021

The chancellor the other week decided to make house buyers (and sellers) happy again as he announced a stamp duty extension and a new mortgage guarantee scheme to kick-start banks lending up to 95% of property values. Here we cover those announcements in more detail and how we think they may impact on property prices.

Stamp Duty Extension

The decision to abolish stamp duty last year on the first £500,000 of a property value, no doubt kick-started the property market as people rushed to move to avoid the hefty tax. But even though the cost was avoided by buyers it resulted in property prices rocketing to the most they have ever been. Originally due to end on March 31st this year, the chancellor has now extended it to June 30th, after which it will then be replaced by a £250,000 exemption across England and Northern Ireland until September 30th. Plus, if you are a first-time buyer, you will still have no stamp duty to pay up to the value of £300,000 on homes priced at £500,000 or less from July. So all in all, if you are thinking of buying, this is good news for you.

5% deposit mortgages are back

With the stamp duty extension and now the news of the return of 95% mortgages, it will no doubt provide more incentives for home buyers to continue to push forward with their moving plans. Due to the pandemic, 95% mortgages were wiped out as lenders were cautious as businesses tightened their belts and furlough was in full swing. With this move by the chancellor, he is hoping to entice banks and lenders to offer this product by the government guaranteeing to shoulder some of the cost if a homeowner cannot make the mortgage repayments on their home and it falls into repossession. But like with all the chancellor’s announcements, there is a time cap. The mortgage guarantee scheme will only run to December 2022 so get saving and get moving.

What does this mean for house prices?

We all want property to be low when we are looking to buy, but the moment we have bought a home, we want it to go up. A home, after all, is our most expensive asset. According to the Halifax, there was a slowdown in house price inflation at the beginning of the year as the end of the stamp duty pause loomed and people waited to see what would be announced in the budget. But with the new initiatives announced by the chancellor, most see this as a positive outcome for the market and are optimistic that house prices will continue to rise throughout this year, especially as lockdown begins to lift from April onwards. The OBR (Office of Budget Responsibility) predicted that there would be a house market crash last year in 2021 of 8.3%. This year it predicts that in the second quarter of this year (April – June) they will rise once again by another 8.1% more than the record prices that the country is currently experiencing.  The chancellor’s initiatives seem to be helping the housing market and be protecting our biggest investment – our homes. For more advice speak to an experienced mortgage broker today, who can search the market and ensure you get the right deal. Our team can guide you through all the options available to you, to find you the best deal for your specific circumstances. For more information get in touch with us today on 0345 305 2540, or at info@taylormade-finance.co.uk.
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