Our reaction to the Chancellor’s Budget
The Chancellor of the Exchequer, Rishi Sunak, has today announced his much-anticipated Budget; but is it good or bad news for the estate agency industry. In this post we discuss some of the announcements and how they will affect buying, selling, and renting.
We welcome the news, announced today in the Chancellor’s Budget, that the stamp duty holiday will be extended. This means that the pressure will be reduced on the backlog of sold properties that estate agents and conveyancers are working through to get to completion. We’ve previously discussed the impact of Covid on progressing sales to completion, and although there were strong indications in the press that stamp duty would be extended, it is good to see it finally confirmed. We also feel that the Chancellor has made a sensible decision in gradually reducing the threshold, rather than reverting it to its previous amount prior to July 2020.
For clarity, no stamp duty will be payable on any residential property purchase up to a value of £500,000 until 30th June 2021; this threshold is then being reduced to £250,000 for the period 1st July 2021 to 30th September 2021. As ever, stamp duty will be payable on property transactions of over £500,000, the rates are applied to the remaining “portions” of the value that exceed the threshold.
The Chancellor has also announced a 95% mortgage guarantee scheme that will be available to all homebuyers in the UK to purchase a home valued up to £600,000 with a 5% deposit. This scheme will run from April 2021 until 31st December 2022, and buyers will have the opportunity to fix the initial interest rate on their 95% repayment mortgage for a minimum of 5 years. Since the pandemic began, virtually all 95% mortgages disappeared from the market; therefore we think this is a positive step by the government to open up the housing market to a wider range of buyers, by increasing the availability of mortgages.
The eligibility criteria is that the mortgage must be residential i.e. not a second home or buy-to-let. The mortgage must be taken out by an individual or individuals and have a loan-to-value of 91-95%. Standard affordability requirements still apply.
What is perhaps less good news for the industry is the increase in corporation tax to 25% which will come into effect in April 2023. The income tax thresholds are also being frozen for five years. Other announcements include an increase in the national minimum wage to £8.91 per house from April; the furlough scheme will now run until the end of September with increasing employer contributions; and the contactless payment limit is being increased to £100.
Whilst the stamp duty extension in particular will help in the short term, it is important to maintain a sense of perspective, and we will continue to operate under the same guidelines, procedures, and standards that we have been since the pandemic started a year ago.
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