Recently, there have been two key developments in the mortgage industry – both of which are great news for home buyers. Here we share what you need to know about the stamp duty holiday extension and the government’s new mortgage guarantee scheme…
Stamp Duty Holiday Extension
What is the stamp duty holiday?
When you buy a property you have to pay Stamp Duty Land Transaction (SDLT) tax on properties worth more than £125,000, or £300,000 if you’re a first-time buyer.
However, in July 2020 the government introduced a temporary tax break to boost the property market which had been affected by lockdown and ultimately Covid-19.
With the stamp duty holiday in place the SDLT tax rate is zero per cent on properties up to £500,000, which is a tax saving of up to £15,000!
When is the stamp duty holiday deadline?
The original deadline was 31st March 2021, however it has been extended to 30th June 2021.
The relief is now tapered, so from 1st July 2021, the threshold will drop from purchase prices of up to £500,000 to purchase prices up to £250,000.
This means that you will pay zero SDLT tax on properties worth up to £250,000 until 30th September 2021. Then, from 1st October 2021 the normal SDLT tax rates will take effect.
What does the stamp duty holiday extension mean for home buyers?
The news of the stamp duty holiday extension was a welcome relief for many people who were in the process of buying and under pressure to complete before the original deadline of 31st March 2021.
The extension allows home buyers more time to complete their transactions and benefit from the generous tax saving opportunity. The tapered relief also helps to relieve pressure to complete by 30th June 2021 as there are still tax savings to be gained until the end of September.
Government Mortgage Guarantee Scheme
In the latest Budget announcement in March, Rishi Sunak shared news of a 5% mortgage deposit guarantee scheme designed to help aspiring homeowners who are struggling to save a deposit.
What is the government’s guarantee scheme?
The mortgage guarantee scheme, which launched earlier this month, increases the appetite for lenders to offer 95% mortgage products by compensating them for a portion of their losses in the event of foreclosure.
There has been a lack of high loan to value mortgage products available due to the impact of the pandemic, and aspiring home buyers have had to save a minimum deposit of 10% to secure a mortgage.
However, saving a sufficient deposit is the biggest barrier to homeownership and the mortgage guarantee scheme is designed to make it easier for people to save a deposit and get on the ladder.
Who is eligible for the mortgage guarantee scheme?
The mortgage guarantee scheme is open to everyone, not just first-time buyers.
·       It has to be a residential mortgage, but not a second home or a buy-to-let
·       A purchase value of up to £600,000
·       For individual borrowers, not companies
·       The borrowers have to meet standard mortgage requirements in terms of creditworthiness and affordability
When does the mortgage guarantee scheme end?
The mortgage guarantee scheme is a temporary solution and is open to new mortgage applications from April 2021 until December 2022.
The government will review the scheme toward the planned end date to determine whether or not an extension would continue to deliver benefits for prospective homeowners.
Affinity Group is on hand to help you understand your options and find the most suitable lender for your individual requirements. What’s more, we help you to secure your dream home purchase or remortgage completely free of charge – so you pay absolutely nothing!
