Young helped with access to overheating property market, or supplying pent-up demand?

by | Mar 3, 2021

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The Stamp Duty can has been kicked down the road, as the Chancellor of the Exchequer Rishi Sunak extends the Stamp Duty Holiday until the 30th of June. Along with this announcement Sunak declared his desire to “turn generation rent into generation buy,” and revealed governmentguaranteed 95% mortgages on homes costing up to £600,000.

So what do the experts think?

On Stamp Duty, Laith Khalaf, financial analyst at AJ Bell, said it was a salve for those homebuyers facing a cliff edge at the end of March under the current plans to withdraw the holiday.

In an apt metaphor Khalaf added, “As any retailing executive will tell you, there’s always a week after a promotional sale when customers are miffed because they just missed out, so the extension and gradual tapering of the tax perk will create a softer landing, with less indignation all round.”

Kevin Dunn, Mortgage Specialist at Furnley House suggested those in the house buying process will welcome the holiday extension, along with doubling of the nil rate band so that stamp duty only applies to houses over £250,000 until the end of September. Adding, “this window of opportunity must be taken.”

Sarah Coles, personal finance analyst at Hargreaves Lansdown, suggested the temporary doubling of the Stamp Duty nil rate band from £125,000 to £250,000 will “boost enthusiasm for buying and selling again, particularly as we head into the key spring months.”

Kevin Dunn points out those not buying a house can also benefit from today’s announcement, saying “House prices in the UK have risen 14% in the last five years (according to Zoopla) while interest rates on mortgages are at record low levels of around 1.29% in some cases, so this is an ideal time for people to consider remortgaging on to a better rate.”

The Stamp Duty holiday extension does raise some questions, Laith Khalaf pointed to the price of stamp duty holiday, estimated to cost the taxpayer around £1.6 billion.

Jessica Ayres, financial adviser from Timothy James & Partners said, “the government doubled down on the housing market and, in particular, for first-time buyers.”

The new scheme will be available from April, enabling homebuyers to purchase properties worth up to £600,000 with just a 5% mortgage. Both first-time buyers and existing homeowners can take advantage of it.

Andy Scaife, CEO of O’Neill Patient, said, “We are very supportive of the Government’s new mortgage guarantee scheme as it should help to further stimulate the housing market as the stamp duty holiday draws to a close.”

Andy Scaife added the 95% mortgage scheme, “is not just for people on lower salaries buying lower valued homes, it is also for those who have a higher income buying in more expensive areas.”

Sarah Coles emphasised the policy, “Is not an excuse for people to over-stretch themselves, because buyers will still have to pass the same affordability checks.”

Coles added, “However, there’s still a risk it will inflate prices further: Shelter says the previous scheme pushed prices up 1.4%.”

Laith Khalaf continued to question government housing policy over the pandemic, in relation to first time buyers. UK property market saw an explosion in demand in 2020, with the UK house price index rising 8.5%. Khalaf asked whether modest house price increases would have been such a bad thing in a year when so many young people lost their jobs.

Khalaf concluded, “If property prices continue to consistently rise above wages, Generation Rent is simply a mantle that will pass from one generation to the next.”

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