Covid-19 has had quite an impact on many aspects of day-to-day life, including the housing market. This time last year, the property market faltered as many people were not allowed to physically complete their move. Once the regulations were eased, the property market quickly regained momentum. Following this, on the 8th July 2020, the first Stamp Duty Holiday was introduced. This meant that it was not just first time buyers who did not have to pay stamp duty but any purchaser of their main home up to a value of £500,000. Ordinarily, a freehold purchaser buying for £500,000 would be expected to make a £15,000 stamp duty payment, so one can see why the holiday has encouraged people to take the next step and make a move in the housing market.
The current Stamp Duty Holiday is now set to end on 30th June 2021 for houses up to £500,000. From 1st July to the 30th September, a buyer will not pay stamp duty on the first £250,000 of the purchase price. From 1st October, things return to normal with the rates as follows:
£0-£125,000 = 0%
£125,001-£250,000 = 2%
£250,001-£925,000 = 5%
£925,001 - £1,500,000 = 10%
£1,500,000 + = 12%
To assist the housing market even further (notably first-time buyers), the Government has announced in the most recent Budget that High Street Lenders will now be offering mortgages to borrowers who are contributing a deposit of just 5%. This new scheme, called the “Mortgage Guarantee Scheme”, is only available to those who are buying a house up to £600,000 as their main residence and does not apply to people buying property to let or as a second home. Lenders such as Barclays, HSBC, Lloyds, NatWest and Santander are already providing this as an option to First Time Buyers (subject to conditions). However, it is important to note that some lenders such as Barclays and Halifax (a subsidiary of the Lloyds Banking Group) have said that these products are not available for new-build properties.
There are further downsides to the new scheme. Firstly, it seems that the lenders who are providing the Mortgage Guarantee Scheme will not allow further borrowing, which does not come as a massive surprise if they are approving a 95% mortgage to start with. Secondly, the scheme is not portable - if the borrower moves house during the lenders’ early repayment window, the mortgage will have to be redeemed and any applicable fees will need to be paid.
Stamp Duty schemes may be great news for house buyers out there but what does this all mean for the Housing Market overall? It has been calculated by the Office for National Statistics that house prices increased by 7.6% annually in England in 2020, with an average house price now of £267,000, the highest since June 2016, and a massive 34% increase in property transactions in the UK during December 2020 when compared with December 2019. It is likely that this is something to do with the current Stamp Duty holiday applying to second and subsequent homes.
It is also important to note that during the current climate, transactions are taking longer than usual due to many people working from home and/or on furlough. For example, Local Searches are taking up to 8 weeks to come back in some areas of Devon, something Conveyancers have to consider when giving an estimated timeframe to clients. Mortgages have also been taking much longer to be issued with some taking months due to delays in finding a surveyor to carry out the survey of the property, although this seems to have improved slightly in the past few months. These are just two examples of factors outside the control of the Conveyancer which can delay a transaction.
When looking to buy or sell, it is worth thinking of possible delays as they could cause a transaction to be taken beyond any current stamp duty deadlines and, therefore, lead to a reconsideration of the purchase price so that a transaction may proceed.
If you're looking to make a move in the property market, contact a member of our Residential Conveyancing Team by calling us on:
Exeter 01392 285000 Cullompton 01884 33818 Newton Abbot 01626 330127