Chancellor of the Exchequer Rishi Sunak is expected to reveal, in the upcoming budget, a six-month holiday for payments of stamp duty on homes up to a value of £500,000 – up from £125,000 previously. The move is designed to give the property market a boost in a difficult time for many, as homebuyers face uncertainty around house prices.
With low-deposit mortgages almost disappearing entirely, what can help first-time buyers get on the property ladder and get the market moving again? David Hannah, Founder and Principal Consultant of Cornerstone Tax, discusses how the government could help the market in the short and medium-term.
“Throughout other economic crises, stamp duty changes or relief have historically done very little to get the market moving again and there is no reason why it would help this time around either. It has been and still is a poor tool for managing market behaviour. With low-deposit mortgages almost disappearing altogether, people are having to assess their options, but there are some ways that I believe the government could help first steppers.
To help these people get on the property ladder, government-backed purchase mortgage guarantees for borrowers would be a great way to reinstall confidence in the lending market. This could also help banks regain confidence in mortgage lending.
If the term of these guarantees were for five years, for example, the inflation of the housing market during the medium term would wipe off any negative equity on those properties. This would give the market some security again, help buyers, and get the market moving again.
Other stimuli such as an extension of Help to Buy would almost certainly help but reinstating 95% mortgages is almost essential in helping turn renters into buyers. Guaranteeing their borrowing for the mid-term will give lenders the confidence to bring these products back and restart the market.”
Florence Codjoe, personal finance expert at Bankrate, also offered her take on the current climate: “Before coronavirus, 2020 showed great promise for the UK’s housing market.
“But with lockdown severing demand and halting transactions, property specialists at Knight Frank believe the number of sales in 2020 will drop by a staggering 38%, and Savills similarly predict short term house prices will decrease by 5-10%. Concerning, yes, but there are things to look forward to.
“Low house prices work for first-time buyers, and these lower asking prices mean the potential of jumping earlier onto the property ladder.
“This pandemic has shifted our views on what we want in a property, including where we want to live. As a result, more may settle for rural areas and open spaces in the city. If they can.
“For those first-time buyers, continue adding to your hard-earned savings and bear in mind a potentially shaky market. But if you find a great deal, go for it.”