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The March 2021 Budget And The Mortgage Market

The March 2021 Budget And The Mortgage Market

by | Mar 12, 2021 | Mortgage News

The latest budget was, unsurprisingly, a lot more focussed on COVID19 than on the housing market. It is, however, also important for property professionals. Here’s a round-up of the key points.

An extension to the Stamp Duty holiday

Arguably it was almost inevitable that the chancellor would need to grant some sort of extension to the Stamp Duty holiday. After all, the logic behind this is, fundamentally, exactly the same as the logic behind the recent extension of the current Help to Buy scheme. The construction industry has been badly hit by COVID19 and now also has to deal with the full impact of Brexit.

This has resulted in delays both to the construction of new-build properties and to the legal completion process. Rather ironically, the Stamp Duty holiday may have exacerbated the latter problem by stimulating activity in the housing market.

With buyers facing the prospect of losing out on the Stamp Duty holiday through no fault of their own, arguably, the government had to act. If it hadn’t then, at best, it could have had a lot of upset buyers on its hands come election time. At worst, it could have led to buyers pulling out of sales due to being unable, or unwilling to pay the increased Stamp Duty.

What is interesting is that Rishi Sunak chose to extend the holiday until the end of June. Then there will be a further three months where the threshold is set at £250K. This means that even new entrants to the market could potentially benefit from it. It also means that there could be another “cliff-hanger” in three and then six months time.

Help for “Generation Buy”.

Back in October 2020, at the (virtual) Conservative party conference, Boris Johnson announced his intention to turn “generation rent” into “generation buy”. He indicated that the government would achieve this by introducing a scheme to guarantee mortgages of up to 95% of the property price.

Fast forward to March 2021 and the chancellor has now indicated what this means in practice. Essentially, the government is bringing back David Cameron’s Mortgage Guarantee scheme. Like the old scheme, it will be available to onward movers as well as first-time buyers. It will also be available on purchases of existing property. The current limit is set at £600K.

ISAs stay untouched

Given that the adult ISA limits have been the same since 2017, it was always highly unlikely that the chancellor was going to feel under any obligation to increase them. The one change was that the penalty for making irregular withdrawals from the Lifetime ISA will be going back up to 25% in April. It was temporarily reduced to 20% to help those affected by the pandemic.

The chancellor did announce the introduction of new NS&I “green bonds”. These are intended to help the UK meet its target of becoming carbon neutral by 2050. At present, it’s unclear whether or not these will have any direct impact on the housing market.

It is, however, worth noting that the government’s commitment to its “net-zero” target requires a switch to electric vehicles. This in turn requires the development of mass-scale charging infrastructure. Areas that get ahead of the curve here could see local house prices rise accordingly.

Widespread tax adjustments

The chancellor’s largesse on Stamp Duty has not extended to other personal taxes. Capital Gains Tax exemptions, Inheritance Tax and the Pensions Lifetime allowance all stay at 2020/2021 levels. The tax-free personal allowance and the higher-rate income tax threshold both stay at 2021/2022 levels.

At present, these freezes are scheduled to stay in place until 2025. This effectively means that people could find their take-home earnings eroded over time. In itself, this does not augur well for affordability. On the other hand, much will depend on how well the economy performs overall.

Owning a home is still possible

Owning a home is still possible

by | Oct 10, 2019 | Mortgage News

It’s no secret that it can be tough to get on the property ladder, either as a genuine first-time buyer or as someone who’s bought before but gone back to renting for whatever reason, for example, to spend some time abroad.  The good news is that, in spite of all the challenges, it is possible.  Here are some tips to make it happen.

The less you spend on rent the more you can save

This may seem like stating the blindingly obvious but it’s one of the many realities of life which can be a whole lot easier in theory than in practice.  To be perfectly blunt, putting together the deposit you will need to buy a home of your own is likely to be a lot easier if you are prepared to make compromises on where you live in the present.  Living with your parents may be the ultimate example of this (their house, their rules) but this is not necessarily a practical option for everyone.

For those living away from home, making compromises may involve choosing a smaller space over a bigger one, accepting a longer commute, or choosing a less-desirable area over a more chic one.  Obviously, all of these options have to be subject to the common-sense test.  There is a limit to how small a space a person can reasonably live in for an extended period of time and there is no point in choosing to live in a place where the housing is affordable but the commute is long if it means that you are just swapping housing costs for commuting costs (and time) and you clearly want to avoid living in a place which is actively unsafe.  All the same, however, all things being equal, you should probably give preference to the place with the lowest housing costs as rent is typically a substantial expense and hence anything you can do to reduce it can make a real difference to how quickly you can save for a deposit.

Always look for ways to increase your income

The nature of your employment will largely determine how feasible it is for you to earn extra money in your main job, but if you’re in a position where you get a fixed salary for (officially) fixed hours and have little scope to earn extra on top and you’d prefer to stay in that job, at least for the foreseeable future, then you can still look for other ways to earn extra money.  Getting a second job can bring all kinds of complications (including your current employer being unhappy about it, you new employer making requests which conflict with your main job and your tax being messed up, although this last should not happen), but there is nothing to stop you setting yourself up as self-employed and building your own little side-hustle.  Just remember that you will need to register as self-employed and pay taxes on whatever you earn.

Take care of your credit rating

If you’ve saved and worked to put together a solid deposit, it would be heartbreaking to be turned down for a mortgage because of silly mistakes such as going over the limit on a credit card or missing a payment.  Standard advice here is to put all payments on Direct Debit so that you never miss one, however, there is an alternative approach, which may save you a little money, at the expense of some organization.  Put as many payments as you can on manual and pay them the moment you have the money to do so, for example on payday or when you get your earnings from your side hustle (remember to set aside money for taxes).  This will minimize the interest you pay.

Your property may be repossessed if you do not keep up repayments on your mortgage.