In yesterday’s Budget Chancellor Rishi Sunak announced the current stamp duty holiday would be extended by another three months.
Stamp duty tax has been suspended on the first £500,000 of the sale price of a house in England or Northern Ireland since last July. This will now continue until the end of June. The Budget went on to give home buyers some more good news. The Chancellor confirmed that even after stamp duty does return, the nil rate band will be doubled to £250,000 until the end of September after which the nil band rate will return to £125,000.
In his statement to MPs Mr Sunak said he feels the extension to the stamp duty holiday will help “to smooth the transition back to normal” for the residential property market. It will continue the good work the stamp duty holiday has done to help buyers who may otherwise have been unable to move because of the financial impact of the coronavirus pandemic.
Although the extension and the additional temporary reduction of the nil band rate will provide the housing market with some much needed confidence, there was even more good news for buyers to follow.
Mr Sunak said that even though stamp duty had been addressed, he recognises finding the required deposit is still preventing a significant number of people from getting on the housing ladder.
This is why he has also introduced a ‘mortgage guarantee’.
If buyers can only put down a 5% deposit rather than the 10% currently expected, the government will give lenders a guarantee on the mortgage. A fast take up is expected and the country’s biggest lenders should be openly offering 95% mortgages from as early as April.
If you are planning to buy a house in England or Northern Ireland before the end of June 2021, you will not have to stamp duty tax on the first £500,000 of the price.
Here is a quick breakdown of all the current stamp duty rates:
Up to £500,000: No stamp duty
£500,001 to £925,000: 5%
£925,001 to £1.5m: 10%
Above £1.5m: 12%
Initial response to these announcements has been extremely positive.
Knight Frank said they felt an extension is only fair as completion dates are not in the hands of buyers and sellers and the gradual tapering of the stamp duty holiday will make the return to traditional stamp duty liabilities more comfortable for everyone involved.
Hargreaves Lansdown said they think the extension will come as a relief to anyone anxiously “stuck in the middle” of a transaction.
And Moneyfacts.co.uk said they felt the extension will persuade buyers and sellers to continue with their plans rather than pull out because of an instant reversion to the previous stamp duty regime.
From our perspective we hope the extension to the stamp duty holiday will provide home buyers and sellers with the reassurance they need to prolong the current level of activity in the housing market, especially as we enter the traditionally busy Spring and Summer months.
It will also ease the worries of those who are in the middle of transactions and were concerned about whether they would complete in time for the old deadline and meet an increase in stamp duty they couldn’t afford.
If you are planning to buy a new house and take advantage of the extended stamp duty holiday, please email me at [email protected] or call me on 0208 515 6600.