Plans to boost the economic recovery, including extending the stamp duty holiday, has been announced in the Budget.
Rishi Sunak has confirmed that the stamp duty holiday will be extended until the end of September.
The chancellor announced that the up-to-£500,000 “nil-rate band” for stamp duty will finish at the end of June, rather than the end of March, as planned. It will then be tapered until September.
Consequently, until 30 June 2021, no stamp duty will be charged on a residential property bought for up to £500,000. This covers the majority of houses and flats in the UK.
Until 30 September 2021, no stamp duty will be charged on a residential property bought for up to £250,000.
Sunak had been under growing pressure to extend the deadline amid concerns it was creating a cliff-edge and risked thousands of buyers pulling out of transactions if they missed the now previous deadline of 31 March for the tax break.
Mark Peck, Director, Cheffins said: “Whilst the extension to the stamp duty holiday will be welcomed for those with property sales already agreed, the government here is simply kicking the can down the road with chaos set to ensue once the tax break comes is reduced in June and tapered until September.
“The pressure on the property industry since the announcement of the stamp duty holiday has been immeasurable and this extension will simply continue to add to the strain already being felt by both buyers and sellers as they look to complete on sales before the end of the tax break.
“Whilst the chancellor has attempted to manage this with the tapering system until September, the property industry will need to brace itself for further pandemonium throughout the summer months. Whilst the stamp duty holiday certainly allowed the property market to continue with full force throughout the coronavirus pandemic and ensure that property sales continued at a fast pace, it has created an unhealthy scenario with values increasing at unsustainable levels within a short space of time.”
In addition, the chancellor announced that first-time buyers will get a “government guarantee” on mortgages, with a deposit of 5%. Many big lenders are already backing the scheme, according to the chancellor.
The new mortgage guarantee scheme is designed to help more first-time buyers onto the housing ladder.
The aim is to stimulate the housing market, get more younger people onto the housing ladder, and increase property transactions; good news for agents.
Mortgages with 5% deposits have been stopped by most banks during the Covid pandemic.
The chancellor will incentivise lenders to provide mortgages to first-time buyers, and existing homeowners, with just 5% deposits to purchase properties worth up to £600,000.
Iain McKenzie, CEO of The Guild of Property Professionals, commented: “The Chancellor gave the property market a double shot in the arm today, with a boost from the stamp duty holiday extension and 95% mortgages.
“Extending the stamp duty holiday until the end of June, then phasing it out until September should help avoid a sudden downturn in prices caused by the much-feared cliff-edge end.
“With the zero-rated stamp duty limit extended to £250k until the end of September and the average UK house price being £252k, it means that thousands of people can benefit from this incentive – particularly first and second-time buyers.
“The Government is really looking to turn Generation Rent into Generation Buy.”Tomer Aboody, director of property lender MT Finance, said: “The stamp duty holiday extension is welcome and will ease the logjam many are facing. The gradual tapering of the return to the £125,000 nil rate band by 1 October should also help avoid the cliff edge that many feared we would have with a sudden cut-off point.
Sunak says the says the Office of Budget Responsibility are now forecasting a “swifter and more sustained recovery than expected”.
He says that the economy is predicted to return to pre-Covid level by the middle of next year, but warns that the economy will be 3% smaller in five years than it would have been.
“The OBR forecast that our economy will grow this year by 4%, by 7.3% in 2022, then 1.7%, 1.6% and 1.7% in the last three years of the forecast,” he said.