Budget 2021: What it means for the housing market

Published by Stephen Metcalf on 3 March 2021

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A lot of current property buyers and arguably estate agents and conveyancers have breathed a sigh of relief this afternoon with the announcement of the Stamp Duty Land Tax (SDLT) rates reduction extension until 30 June 2021.

The temporary SDLT relieving measures, whereby residential property purchases benefited from an increased nil rate band of £500,000 (saving up to £15,000 of SDLT), were due to end on 31 March 2021. This relief which came into force last summer has been hugely popular and arguably has kept the property market extremely buoyant, whilst many other parts of the economy have ground to a halt. In recent weeks and months, there have been stories of stressed-out buyers desperately trying to push through the property purchase, and conveyancing solicitors under ever increasing strain to get through the additional workload before the relief ends.

Whilst some commentators were arguing for this relief to be extended, many others have pointed out that with a simple extension of the relief until a further date, the same issues around completing transactions before that later date would occur. The Chancellor seems to have addressed this to some extent, by announcing that the nil rate band will reduce gradually, beginning with a reduction to £250,000 from 1 July until 1 October when it goes back to the normal level of £125,000.

Other concerns with this form of relief however remain, with a perception that in fact the SDLT savings have been eaten up in a buyer’s budget by an increase in house prices across this time. With there having already been a relief for first time buyers from SDLT, this measure has potentially been seen as actually disadvantaging those first-time buyers.

The Chancellor again was perhaps trying to be seen to address this concern by announcing further measures to support the residential property market.

Mortgage guarantee scheme introduced

A mortgage guarantee scheme is being introduced from April 2021, which will see the government providing a guarantee to UK lenders who offer mortgages to those individuals with a deposit of 5% on homes worth up to £600,000. Buyers will also be able to fix their mortgage rate for at least 5 years under this scheme. It will be available to all new mortgages up until 31 December 2022 addressing concerns that lenders in the current market have been reducing the availability of higher loan to value mortgages.

This is likely to benefit first time buyers who are currently saving up deposits, and so may give the boost required to keep the housing market going, with first time buyers quite often the key to ensuring chains of property purchases all complete.

But again, there will be a feeling that this support in the property market fuels house price inflation and when that support ends, we have to hope that the tragic negative equity issues which many faced in the early nineties does not rear its head.

We will be regularly updating the Budget pages of our website. If you would like to discuss the implications, please don’t hesitate to get in touch. Alternatively, book your place on our Budget question time webinar on Friday 5 March 2021 to find out more.

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