Country houses for sale

Stamp Duty holiday extended to June and tapered until September, and government backing 95% home loans

The government has confirmed its plans to extend the Stamp Duty holiday until the end of June, with a tapered return after that, as well as a scheme to guarantee 95% mortgages for first-time buyers.

In Wednesday’s budget the Chancellor of the Exchequer, Rishi Sunak, confirmed the widely-leaked extension to the current Stamp Duty holiday, meaning that no Stamp Duty will be due on the first £500,000 of house sales until the end of June.

The tax break had been scheduled to come to and end on March 31 in England and Northern Ireland, and an estimated 300,000 house buyers are expected to benefit from the extension. Many had been racing to get their purchases completed before March 31 in order to save as much as £15,000 on their purchase.

But the Chancellor also listened to agents’ concerns about a ‘cliff edge’ end to the tax holiday. As a result, he introduced a degree of tapering: the Stamp Duty threshold will be halved to £250,000 from July until the end of September, only returning to its pre-pandemic level of £125,000 after that.

‘The extension is fair because completion dates for buyers and sellers have been jeopardised through no fault of their own,’ says Tom Bill of Knight Frank.

‘The conveyancing system has simply been overwhelmed by the volume of transactions since the market re-opened last May. The three-month taper until October will make any cliff-edge in June feel less steep but we would still expect a surge in activity to capitalise on the full saving.’

The Stamp Duty holiday extension, however, only apply in England and Northern Ireland. Scotland’s Land and Buildings Transaction Tax and the Welsh Land Transaction Tax both had similar holidays brought in last year (raising the threshold to £250,000), but it’s unclear whether those changes will also be extended.

‘We urge the Governments in Scotland and Wales to follow the UK Government’s lead on this,’ says Mark Hayward from Propertymark, a professional body for estate and letting agents. ‘We know from our own research that failed sales cost estate agents more than £4000 per sale and consumers more than £1500.’

Mr Sunak also confirmed plans that will help buyers borrow to buy a house even without a sizeable deposit, with the government to guarantee home loans with a 95% loan-to-value ratio.

Almost all the major lenders — including HSBC, Santander and Lloyds — have already confirmed they will offer the loans from April, although there is no word yet on whether these buyers will be offered the same rates as those borrowing with a far smaller LTV ratio.

‘Purchasers at higher LTVs have had a tough year in the mortgage market, so any help is welcome,’ notes Knight Frank’s Oliver Knight. ‘However, banks have demonstrated a reluctance to lend in this market during the past twelve months, partly due to the sheer volume of business at lower LTVs and partly due to concerns over the outlook for jobs.

‘Though that outlook is improving, the success of the scheme will depend on how many lenders take it up, on top of those announced so far, and what pricing they adopt. The government will be hoping the guarantee will significantly stimulate appetite to lend in that space.’

Not everyone was upbeat, however. Islay Robinson, CEO of Enness Global Mortgages, said that, ‘95% mortgage products in any shape or form take the market into pretty overheated, dangerous territory and we’ve previously seen the results of this kind of precarious lending to those who aren’t really in the financial position to commit to it…

‘Although many big lenders have committed to the government’s announcement today, it will be interesting to see just how many buyers are able to secure such a product when it comes to actually applying.’

As for what was missing? Help to increase housebuilding, according to many commentators. James Forrester, Managing Director of lettings and estate agent Barrows and Forrester, probably put it best: ‘Extremely disappointing to see the Government maintain their head in the sand stance on building more homes,’ he said

‘They usually talk a good game with regard to house building and we often hear dramatic cries of “build, build, build” when the Budget rolls around. Unfortunately, the only thing that has been built is the suspense waiting for them to deliver on these promises.

‘This time around we didn’t even see the usual empty rhetoric and hot air, so we can assume that they will continue to ignore what is perhaps the biggest problem currently impacting the housing market.’