As the economy starts to reopen, the government has delivered substantial support to property buyers in England and Northern Ireland, with reduced Stamp Duty costs.
Stamp Duty is the tax applied to a property purchase. The temporary cut in stamp duty that’s just been announced will run until 31 March 2021, and means that only those purchasing a property for over £500,000 would face any stamp duty fees.
In fact, nearly nine out of ten property purchasers will pay no stamp duty at all.
To give you a feel for the impact of this initiative, under the old rules, if you were a homemover and purchased a £500,000 property, then there would be £15,000 of stamp duty to pay. Under the new temporary rules, it’s £0.
Also, it’s not just those moving home, or buying their first home that may benefit. Those purchasing an ‘additional’ home (such as landlords) will also see a reduction in the stamp duty bill for any property purchase within this period. The only difference is that the extra 3% surcharge will still apply across the board – meaning, for example, that the applicable rate for them on a purchase up to £500,000 would be 3%.
Those already on the property ladder and looking for a larger (possibly more expensive) home, will see a noticeable benefit, as set out earlier.
Elsewhere, this initiative could also encourage the older ‘last-time’ buyers, who have a large home (and need less space), but were put off by the cost of stamp duty. If this occurs, then the supply chain for larger homes would improve.
Under the old tax scheme, many would have benefited from a zero rate tax up to £300,000. In this scenario, the same first-time buyer now purchasing a £500,000 property (at zero rate tax) would benefit to the tune of £10,000 against the previous charging structure.
The Green Homes Grant
To help meet the government’s climate change ambitions, job creation objectives
and improve confidence in the housing sector, the government will also introduce a £2 billion Green Homes Grant.
Against certain criteria, this will provide at least £2 for every £1 homeowners and landlords spend to make their homes more energy efficient, up to £5,000 per household. Or, in the case of those on the lowest incomes – up to £10,000. The scheme aims to upgrade over 600,000 homes across England, saving households hundreds of pounds per year on their energy bills.
Mortgage Deals out there
For those that are coming towards the end of their deal period, or are simply seeking a decent mortgage deal, then the position has further improved since January.
And, as shown, the comparative SVR rate is somewhat higher than what’s on offer, so it would really make sense to have a chat.
Average Fixed Rate, and Standard Variable Rate (SVR) vs. January.
|January 20||14 July 20|
|2-year fixed rate||2.44%||2.00%|
|5-year fixed rate||2.74%||2.25%|
Higher Loan-to-Value Deals
Whilst the recent initiatives from the government will help to stimulate ‘demand’, there have been issues throughout this crisis in the ‘supply’ of enough higher Loan-to-Value (LTV) mortgage deals. At various times, lenders have introduced and then pulled 90% and 95% LTV deals.
If we apply the same January to July comparison, back in January there were 751 different 90% LTV deals out there, which had reduced to 49 by 14 July! A similar scenario was evident for the 95% LTV deals; 386 vs. 20.*
In which case, if you are looking to purchase a property and have a deposit in the realms of 5-10%, then it’s vital that you talk to us as we’ve been working extremely hard for other clients to help secure these deals and know the best options and pitfalls.
Do get in touch to hear more.
You may have to pay an early repayment charge to your existing lender if you remortgage.
Your property may be repossessed if you do not keep up repayments on your mortgage.