4 key housing takeaways from the Budget
From the stamp duty holiday extension to the new 95% mortgage guarantee scheme, here’s how Chancellor Rishi Sunak’s announcements in the Budget could impact you.
1. Stamp duty holiday extension
Chancellor Rishi Sunak has extended the stamp duty holiday by three months.
The threshold at which buyers start paying stamp duty was temporarily raised from £125,000 to £500,000, in England and Northern Ireland, last July. The deadline has now been moved from the end of March until 30 June.
And to avoid a ‘cliff edge’ when this period ends, the tax-free threshold will then drop from £500,000 to £250,000 for a further three months until 30 September.
The threshold for the nil rate band will fall back to its usual level of £125,000 on 1 October.
Read our stamp duty holiday explainer and our guide on regular stamp duty and how it's calculated for more details.
Who does it affect?
The move is great news for people in England and Northern Ireland who are either already in the process of buying a home and were in danger of missing the previous deadline of 31 March, or are planning to purchase a property in the immediate future.
The extension of the stamp duty holiday means buyers will save an average of £4,500 each and a maximum of £15,000 if they complete their property purchase – legally transferring ownership – within less than four months.
Meanwhile, those who finalise a property purchase between 1 July and 30 September will be able to save up to £2,500 each.
Richard Donnell, research director at Zoopla, said: "Some 234,000 sales have been agreed since mid-December, with one in five of these transactions in the south east of England.
"Buyers in the south east will make savings of £271m. Total savings across the country, allowing for four months between sale agreed and completion, is around £987m.
"The tapering move by the Chancellor means that nearly half of sales in England will be free of stamp duty. Last year, some 46% of all home sales were for properties of up to £250,000."
2. 95% mortgage guarantee scheme
A new mortgage guarantee scheme has been unveiled to help people buy a property with a deposit of just 5%.
The initiative, which will be available from April, will operate in a similar way to the previous Help to Buy mortgage guarantee scheme, with lenders able to purchase insurance from the government to cover some of their losses if the property is repossessed.
The scheme aims to increase the availability of 95% loan-to-value (LTV) mortgages through reducing the amount of risk lenders have to take on.
There are currently just a handful of these deals on offer, with the majority only available to people who meet certain criteria.
Borrowers using the new guarantee scheme will have the opportunity to take out a fixed rate mortgage for five-years if they want to.
A number of lenders, including Lloyds, NatWest, Santander, Barclays and HSBC, have already signed up to the scheme.
The initiative, which comes after Prime Minister Boris Johnson pledged to “turn generation rent into generation buy” at the Conservative party conference in October last year, will run until December 2022, by which time it is hoped the availability of 95% LTV mortgages will have recovered.
Who does it affect?
Unlike the Help to Buy equity loan scheme, the new mortgage guarantee scheme will be available to both first-time buyers and existing homeowners, including those trying to remortgage with low levels of equity in their property.
Buyers will also be able to use it to purchase any type of property, not just a new-build home.
The only restriction is that the property cannot cost more than £600,000 and it must be your main home, not a buy-to-let property or second home.
Donnell explained: "Supporting buyers with small deposits is key to widening access to home ownership for a part of the mortgage market that has been under-served.
"Our analysis shows the scheme will have the greatest benefits for buyers in lower value housing markets in northern England and Scotland where a 95% mortgage is more attainable.
"The scheme will have less impact for buyers in southern England where high house prices are a major barrier to being able to afford a 95% mortgage."
3. Tax thresholds frozen
A number of tax thresholds, including those for capital gains tax (CGT) and inheritance tax, will be frozen until April 2026.
The CGT threshold will be held at £12,300 for the 2021/22 tax year, while the inheritance tax one will remain at £325,000.
Who does it affect?
The move to freeze CGT means anyone selling an investment property or a second home will have to pay capital gains tax of 28% on any increase in the property’s value since they first bought it above £12,300.
Couples who jointly own a property can combine their CGT allowance to £24,600.
Inheritance tax is paid at 40% on all assets worth more than £325,000 that are not left to a spouse or civil partner, although this threshold increases to £500,000 if you leave your home to your children or grandchildren.
If you are married or in a civil partnership, and your estate is worth less than the threshold, you can transfer the difference between the value of what you leave behind and the threshold to your partner.
The freezing of the thresholds for these two taxes at a time of strong house price growth means more people will be liable for them and will face larger tax bills.
Donnell said: "Speculation over a hike in capital gains tax has already forced some landlords to act and we have seen a spike in the flow of homes for sale that were previously rented."
Our guide gives the lowdown on your tax liabilities as a landlord.
4. Extension of the furlough scheme
The furlough scheme will be extended until the end of September.
Employees covered by the scheme will continue to receive 80% of their salary for hours not worked, although their employers will have to make a contribution towards this in August and September.
Government support for people who are self-employed will also continue until the end of September through two grants equivalent to 80% of three months’ average trading profits, capped at £7,500.
Who does it affect?
The extension of financial support for people whose jobs have been impacted by the pandemic is good news for the housing market in general.
If property owners with a mortgage continue to receive a regular income despite not being able to work their usual hours, it makes it less likely that they will fall into mortgage arrears and have their home repossessed.
High numbers of forced sales as a result of arrears and repossessions typically lead to house price falls, so preventing people from losing their homes should help to support property values.
Stamp duty holiday extension confirmed: everything you need to know
The Chancellor has extended the stamp duty holiday until the end of June. It will then be tapered off for a further three months. Here’s what it could mean for you.
Chancellor Rishi Sunak has announced the stamp duty holiday will be extended for a further three months until the end of June.
The extension, which will apply to all buyers, means people in England and Northern Ireland will not have to pay stamp duty on the first £500,000 of property if they complete – in other words, legally transfer ownership – before June 30.
To avoid a ‘cliff edge’ at the end of this period, stamp duty will not be charged on the first £250,000 of a property purchase between 1 July and 30 September.
The threshold for the nil rate band will then fall back to £125,000 on 1 October.
The extension of the holiday means nine out of 10 people buying a property will not have to pay stamp duty, saving them an average of £4,500 each and a maximum of £15,000 for those purchasing a home costing £500,000.
Richard Donnell, research director at Zoopla said: "The stamp duty extension to June means a further 234,000 buyers who have already agreed a sale will save an estimated £987m on stamp duty.
"And those who agree a sale from now will be guaranteed savings of up to £2,500 as long as they complete before the end of September.
"This will take 46% of homes out of stamp duty until the end of September. This removes a major cost from moving home that hits hardest in southern England where the mortgage guarantee is less effective.”
Why has the stamp duty holiday been extended?
The Chancellor announced the stamp duty holiday in July 2020 to help kickstart the housing market in England and Northern Ireland following the first national lockdown.
The tax break, combined with many people carrying out a ‘once-in-a-lifetime’ re-assessment of their housing needs in the face of the pandemic, triggered a mini home buying boom.
But the steep spike in housing transactions led to a congested sales pipeline and the home buying process taking longer than usual.
We estimated that around 70,000 people who agreed sales in 2020 were in danger of missing the 31 March deadline.
And a petition calling for the stamp duty holiday to be extended received more than 100,000 signatures, triggering a debate to be held in Parliament in February.
Can you still buy a home before the stamp duty holiday ends?
Yes, hundreds of thousands of buyers who have already agreed a sale with little or no expectation of making stamp duty savings will benefit from the Chancellor’s three-month extension to the main stamp duty holiday.
Buyers who are now looking for a new home could benefit from the full savings of up to £15,000 if they complete their sale within less than four months.
But all buyers who enter the housing market within the following months are very likely to save up to £2,500 if they finalise their purchase by the end of September.
Donnell explained: "Some 234,000 sales have been agreed since mid-December, with one in five of these transactions in the south east of England.
"Buyers in the south east will make savings of £271m. Total savings across the country, allowing for four months between sale agreed and completion, is around £987m."
If you're looking to take advantage of the stamp duty holiday, you'll need to have your ducks in a row well before it ends.
The time it takes between agreeing a sale and completing is normally around 90 days.
But our research shows that the average time for a sale to cross the line is now just under four months – around a fortnight longer than normal.
What happens when the stamp duty holiday ends?
Once the stamp duty holiday ends on 30 June, there will be an interim period until 30 September when the tax-free threshold will fall to £250,000.
The tapering move means that nearly half of housing sales in England will be free of stamp duty. Last year, some 46% of all home sales were for properties of up to £250,000.
What are the stamp duty thresholds from 1 October 2021?
The former stamp duty rules will apply from 1 October. This means buyers can be charged between 2% and 12% tax (or up to 17% if they are a foreign investor) on their property purchase, depending on the value of the home they are buying and if they own more than one property.
Stamp duty is calculated as a percentage of the property you are buying. It applies to freehold and leasehold properties, whether you’re buying outright or with a mortgage.
For existing homeowners, the rates are:
- 0% up to £125,000
- 2% on £125,001 - £250,000
- 5% on £250,001 - £925,000
- 10% on £925,001 - £1.5m
- 12% on any value above £1.5m
For example, if you buy a flat for £275,000, the stamp duty you owe would be:
- 0% on the first £125,000 = £0
- 2% on the next £125,000 = £2,500
- 5% on the final £25,000 = £1,250
Total stamp duty = £3,750
Read our guide to find out more about stamp duty and how it's calculated.
Landlords and second-home owners
For owners of more than one property, a surcharge of 3% on top of the standard stamp duty rates apply.
However, if you sell a home within three years of purchasing a second property, you can apply for a refund of that 3%.
It is also possible under some circumstances to claim multiple dwellings relief.
Dig into the detail in our Q&A on the 3% surcharge.
Non-UK residents
From April 2021, an additional 2% stamp duty levy will be imposed on non-UK residents who buy property in England and Northern Ireland.
It means that international buyers of second homes could pay up to 17% tax on expensive properties.
The 2% is on top of standard rates and in addition to the 3% surcharge for any investors who own property elsewhere.
First-time buyers
First-time buyers are exempt from paying regular stamp duty on properties costing up to £300,000 and pay 5% on the value of a property between £300,000 and £500,000.
A first-time buyer will pay:
- 0% on the first £300,000
- 5% on the remainder up to £500,000
So a first-time buyer purchasing a £275,000 flat would pay no stamp duty.
For a house costing £475,000, a first-time buyer would pay:
- 0% on the first £300,000 = £0
- 5% on the final £175,000 = £8,750
Total stamp duty = £8,750
However, if the purchase price is more than £500,000, first-time buyers cannot claim the relief and must pay the standard rates.
For example, a property purchased at £700,000 would result in a stamp duty bill totalling £25,000 even for a first-time buyer.
Stamp duty relief was introduced in November 2017 to help people step onto the property ladder.
Our guide on the first-time buyer exemption has more detail.
When do you pay stamp duty?
You must pay stamp duty within 14 days of completing your property purchase. Your solicitor or conveyancer will usually file this return and transfer the money on your behalf.
What other government support is available?
During the second lockdown, the government extended its offer of mortgage payment holidays. Borrowers who need help paying their mortgages can still request a holiday of up to six months until 31 March 2021.
Meanwhile, the government's Help to Buy scheme offers an equity loan to buyers with a 5% deposit. The initiative will close on 31 March and be replaced with a new version, which will only be available to first-time buyers.
Find out some of the other initiatives and allowances you could benefit from before the end of the tax year in our article.
The Chancellor also announced a new scheme in the Budget under which home buyers will be able to take out a 95% mortgage, with the government acting as guarantor.
The scheme comes after Prime Minister Boris Johnson pledged to “turn generation rent into generation buy” at the Conservative party conference in October last year. A number of lenders have already signed up to the scheme, which will launch next month.
What about stamp duty in Scotland and Wales?
Housing is a devolved issue in Britain so stamp duty only applies in England and Northern Ireland.
Scotland and Wales have equivalent taxes, and similar breaks have been introduced.
Scotland
In April 2015, stamp duty was replaced by Land and Buildings Transaction Tax (LBTT).
In Scotland, the LBTT rates are:
- 0% up to £145,000
- 2% on £145,001-£250,000
- 5% on £250,001-£325,000
- 10% on £325,001-£750,000
- 12% on any value above £750,000
First-time buyers pay no LBTT up to £175,000.
Wales
Property owners in Wales have paid Land Transaction Tax (LTT) since April 2018.
LTT rates are:
- 0% up to £180,000
- 3.5% on £180,001-£250,000
- 5% on £250,001-£400,000
- 7.5% on £400,001-£750,000
- 10% on £750,001-£1.5m
- 12% on any value above £1.5m
In December, the Welsh government introduced an additional charge for second-home owners.
Second home-owners will now pay a 4% levy when they buy homes up to £180,000, rising to 16% for homes worth £1.6m or above.
Help to Buy: how it's impacted home buyers
The latest government figures reveal who has used the flagship scheme to step onto or up the housing ladder – and how.
More than 290,000 people have used the government’s flagship Help to Buy equity loan scheme to buy a home.
A total of 291,903 buyers had used the scheme by the end of September, seven-and-half years after it was first launched.
Help to Buy enables people to purchase a new-build home with just a 5% deposit, which the government tops up with a 20% equity loan that is interest-free for five years.
The average cost of a home purchased through the scheme was £290,000 between July and August 2020, while more than half of those using Help to Buy had a household income of £50,000 or less.
Who has used Help to Buy?
First-time buyers
First-time buyers have benefitted the most from Help to Buy, accounting for 82% of all purchases made through the initiative, government figures showed.
The average property bought using Help to Buy by people taking their first step onto the housing ladder cost £279,995, while they had a typical household income of £53,218.
A new version of the scheme is being launched on 1 April that will be available exclusively to first-time buyers.
It will also see the introduction of regional price caps on the value of properties that can be purchased through the scheme.
These price caps range from £186,100 in the north east to £437,600 in the south east and £600,000 in London.
Homeowners
People who already owned a home or had previously done so have also benefitted from Help to Buy.
While they only account for 18% of all purchases made using the scheme, the typical home they bought was significantly more expensive than those purchased by first-time buyers at an average of £346,995, while they had an average household income of £60,960.
Homeowners were also more likely to put down deposits that were higher than 5%, with nearly a third putting down a deposit of more than 15%.
Buyers in London
Unlike the rest of the country, where the size of the equity loan is capped at 20% of the property’s value, people buying a home in London can apply for an equity loan worth 40% of their property’s value.
Unsurprisingly, the average purchase price paid by people using Help to Buy in London was significantly higher than the national average at £430,168.
What sort of property have they bought?
A quarter of all properties bought by first-time buyers since Help to Buy’s launch have been detached houses, while 34% have been semi-detached homes.
Only one in five properties bought using the initiative have been flats, which are typically seen as first-time buyer homes.
What’s the background?
The Help to Buy equity loan scheme was designed to overcome one of the biggest barriers many people faced to homeownership, namely saving a large enough deposit to enable them to qualify for a mortgage.
The number of homes bought using the government scheme has increased every year since its launch, apart from in 2020 when transaction levels were impacted by the pandemic lockdowns.
Even then, the number of homes bought using Help to Buy were still 11% higher between July and August 2020, once the housing market had fully reopened, than they were in the same three months the previous year.
Top three takeaways
- More than 290,000 buyers have used the Help to Buy equity loan scheme since it was first launched
- First-time buyers have been the biggest beneficiaries, accounting for 82% of all purchases made through the scheme
- The average cost of a home bought through Help to Buy was £290,000 between July and August 2020
6 things to make the most of before the end of the tax year
Whether you’re a first-time buyer, homeowner, or landlord, here are some initiatives and allowances you could benefit from before 5 April.
1. Stamp duty
You could save up to £15,000 in tax if you buy a home before the stamp duty holiday ends on 31 March.
Chancellor Rishi Sunak raised the threshold at which stamp duty applies to £500,000 last July, meaning that nearly nine out of 10 transactions are no longer subject to stamp duty.
With many buyers rushing to beat the stamp duty deadline, the conveyancing process – in other words, the legal work associated with buying property - has got longer.
But there are ways to boost your chances of securing a quick sale, such as buying a new-build home direct from a house builder or bidding on property at auction. And there are steps you can take to help the conveyancing process go as smoothly as possible.
Normal stamp duty rates will apply after the deadline has passed. However, first-time buyers will still be exempt from stamp duty on the first £300,000 of a property purchase for homes costing up to £500,000 once the holiday ends.
It’s also worth noting that if you are currently living overseas and want to buy a property in England or Northern Ireland, you have until the end of the current tax year to beat a new stamp duty surcharge for non-residents.
From 1 April, all buyers who are not UK residents will have to pay additional stamp duty of 2% on the entire purchase price of their property.
As a result, if you are buying a £250,000 home you will have to pay an extra £5,000, on top of the basic stamp duty of £2,500, to give a total of £7,500.
2. Help to Buy equity loan scheme
The Help to Buy equity loan scheme in its current form enables you to buy a new-build home with just a 5% deposit, which the government tops up with a 20% five-year interest-free equity loan.
The initiative will close on 31 March and be replaced with a new version of the scheme, which will only be available to first-time buyers.
Regional price caps on the maximum value of properties that can be bought using the scheme are also being introduced.
3. Mortgage payment holidays
While you can benefit from deferring your mortgage payments until 31 July, lenders have warned that you must apply for one of the mortgage payment holidays before 31 March.
The scheme enables you to defer mortgage payments for up to six months, although if you are applying for your first holiday, now you will only be able to defer them for up to three months.
You will not have to pay anything during the payment holiday period, but interest will continue to accrue and will be added to the total amount you owe.
The mortgage payment holiday scheme, which had been due to end on 31 October 2020, was extended for a further six months as the UK continued to suffer economic fallout from the coronavirus pandemic.
4. ISA allowance
If you are saving for a housing deposit, make the most of your ISA allowance. You can save up to £20,000 in the current tax year and this can be split between different ISAs.
If you have a Lifetime ISA, which is aimed at first-time buyers and pension savers, you can save up to £4,000 into it each tax year.
The government contributes 25p for every £1 you save, meaning the maximum amount will earn you a tax-free bonus of £1,000.
5. Lifetime ISA charge relaxation
To help people who need to tap into their savings during the pandemic, the government reduced the withdrawal charge for money taken out of a Lifetime ISA from 25% to 20% between 6 March 2020 and 5 April 2021.
The tax-free savings accounts, which can be opened by people aged between 18 and 39, can be used to save for a deposit for a first home or for retirement.
The exit penalty for any withdrawals that are not used to buy a property or fund retirement will revert back to 25% after 5 April.
6. Capital gains allowance
If you’re selling a second home or investment property, you could be liable for capital gains tax, charged at a rate of 18% for basic rate taxpayers and 28% for higher rate ones on any gains made.
But everyone has an annual capital gains tax allowance, which for the 2020/21 tax year is £12,300, rising to £24,600 for assets that are jointly owned by a couple.
If you have sold a property during the past year, remember to offset any profits against this allowance.
Revealed: what the latest housing trends could mean for you
Eyeing a home move? Head of research, gives the lowdown on the housing market, from house prices to the stamp duty holiday.
Q. How are the first few weeks of the year shaping up?
A. It has been a fast start in the market in 2021. Demand for property after Christmas has rebounded even more quickly than at the start of 2020 as buyers try to beat the stamp duty holiday deadline.
Our data shows that demand for homes between Boxing Day and 17 January was running 13% higher than the same time a year ago, with the number of new sales agreed also up 8%. This trend is broadly uniform across all regions and countries.
Q. What impact is the third national lockdown having?
A. The third lockdown is exacerbating a supply/demand imbalance in housing.
Buyer demand continues to gather pace. But it is more than the stamp duty deadline motivating movers. While early January is typically one of the busiest times for new buyers, this year’s activity is compounded by the impact of the pandemic.
Successive lockdowns and restrictions mean that people have been spending more time at home, and this is making some homeowners reassess the space and location of their home. It has been the catalyst for a lot of movement.
At the same time, high numbers of Covid-19 cases and calls to uphold social distancing have prompted some sellers to press pause on opening their homes for viewings and listing their property for sale at present.
If sellers remain cautious and the supply of homes for sale scarce, the choice for buyers will be limited, which will continue to put upward pressure on prices.
We expect the sellers currently putting sales on hold to continue with their sale as Covid-19 case numbers start to fall sharply or we move back to regional tier-based restrictions.
Q. So pandemic-led restrictions are making some sellers reluctant to list their homes for sale. Are there any areas that are bucking this trend and why?
A. We’ve seen a rise in the supply of homes for sale in London. This is likely driven by some flat-owners looking to move into more spacious homes or move further out of the city.
Also, there could be some rental properties being sold as landlords keep an eye on any potential tax changes around capital gains tax (CGT) for investors. These have not been announced or signalled by Chancellor Rishi Sunak, but the Office of Tax Simplification has recommended to Sunak that the rules should change.
This could create more choice for buyers. Yet, even with this rise in supply in London, prices are continuing to climb, up 3.1% in 2020.
Q. At a UK-wide level, house prices are continuing to rise. Where are the hottest local markets?
A. Despite the third lockdown, UK house prices are close to a four-year high of 4.3%, the highest level since April 2017. Momentum for this is coming from Wales, northern England and Scotland, where demand is strong and affordability levels are higher.
House price growth has now hit a 10-year high in three regions: north east, north west and Yorkshire & Humber, with prices currently ranging between 3.7% and 5.4% year-on-year.
At a country level, Wales is the fastest-growing housing market, with annual prices up 5.4%. And at a city level, Liverpool has experienced its fastest rate of growth for 15 years – since well before the global financial crisis.
While house prices have increased in southern regions too, affordability pressures are limiting above-average growth.
Q. The stamp duty deadline is just months away now. What does this mean for buyers and sellers?
A. There’s a lot of focus on the deadline. With more sales in the pipeline than previous years, the average time it takes from agreeing a sale to completing it is approaching four months – up by two weeks.
We estimate that up to 70,000 sales agreed in 2020 may miss the deadline. There may be a case for a short, month-long extension to help buyers get their purchase over the line. A petition calling for an extension gathered enough signatures for it to be debated by MPs recently.
At present, we expect around half the sales agreed in January will meet the deadline.
As ever with the end of a stamp duty holiday, there may be a slowdown in activity immediately after the tax break window ends, but we do expect activity to continue, with total transactions this year matching those seen in 2020.
Thank you.
Nearly 750,000 buyers benefit from stamp duty holiday
People buying a home with a price tag of up to £500,000 have saved an average of £4,660 each as a result of the stamp duty holiday.
Nearly 750,000 homebuyers in England are set to benefit from the stamp duty holiday, collectively saving almost £5bn.
A total of 600,000 buyers who agreed a sale from May 2020 onwards will not pay any stamp duty at all as a result of the stamp duty holiday.
They will save an average of £4,660 each, or £2.8bn collectively, assuming they complete before the 31 March deadline.
A further 140,500 people buying homes costing more than £500,000 will benefit from a reduction in the amount of stamp duty they pay, according to our analysis.
And they will save £15,000 each, or £2.1bn in total, although they will still have to pay the tax on the portion of their property’s value above £500,000.
Why is this happening?
The stamp duty holiday on homes costing up to £500,000 was launched by the Chancellor in July last year to help boost the housing market after the first national lockdown was lifted.
The tax break, combined with many people carrying out a once-in-a-lifetime re-assessment of their housing needs, triggered a boom in property sales, with 11% more homes changing hands in 2020 than in 2019.
Who does it affect?
Stamp duty is paid on completion - in other words, when ownership is legally transferred.
So the stamp duty holiday not only benefitted people who were already in the process of buying a home when the tax break was announced, it has also acted as an incentive for other potential buyers to move home before 31 March deadline.
The spike in buyer appetite triggered in part by the stamp duty holiday has encouraged some people to put their homes up for sale - many buyers are sellers, too.
This combination of sustained buyer demand and more homes on the market has boosted overall activity levels.
Can I still benefit from the stamp duty holiday?
Under normal circumstances, anyone who agreed a sale during any calendar year would expect to have completed on it by the end of March the following year.
But a ‘bulge’ in the sales pipeline has meant that the average time it takes from a sale being agreed to legal completion is now approaching four months.
As a result, up to 70,000 property sales that were agreed in 2020 are at risk of missing the 31 March deadline to benefit from the stamp duty holiday. Calls are now growing for the stamp duty holiday to be extended.
However, there are ways to boost your chances of securing a quick sale, such as snapping up a new-build home direct from a house builder or buying a property via an auctioneer, such as iamsold.
What can I do to speed up my transaction?
If you are in the process of buying a home, there are a number of steps you can take to help the conveyancing process go as smoothly as possible.
Make sure you have all the relevant paperwork you will need to hand and respond to any requests for additional information as quickly as possible.
If you need to sign documents and return them to your solicitor, consider delivering them by hand, rather than relying on the post or even a courier.
Maintain a high level of communication with your solicitor and estate agent to try to keep the process on track. It can be a good idea to agree to have a weekly update from all parties.
Finally, be prepared to be flexible. If you are also selling a property and an issue is uncovered in the buyer’s survey, you may have to be prepared to drop your agreed sale price slightly to keep things moving along.
Research director said: “Demand for housing has started 2021 as strongly as last year with limited evidence new buyers are being put off by the proposed ending of the stamp holiday.
“The pandemic and lockdowns continue to stimulate households to move home and this will help soften the short-term impact when the stamp duty holiday finally ends.”
Top three takeaways
- A total of 600,000 buyers will not pay any stamp duty at all as a result of the tax break, saving an average of £4,660 each
- A further 140,500 people buying homes costing more than £500,000 will see a reduction in the amount of stamp duty they pay, saving them £15,000 each
- An estimated 70,000 sales that were agreed in 2020 are at risk of not completing in time to benefit from the stamp duty holiday.
Revealed: where family homes have seen the biggest jump in value
Searching for a home with more space? Find out how three to five-bedroom houses are performing in different areas.
Family homes in the Midlands have seen the biggest jump in value during the past four years.
The East Midlands ranks in first place, with the price per sq ft of a family home in the region increasing by 25.4%, or £43, since 2016 to stand at £212.
Meanwhile, the West Midlands comes in second place. The price per sq ft of a family home, defined as a three to five-bedroom house, has risen by 24.6% to £223, according to our data.
Price per sq ft measures the ratio between property value and size. In other words, it offers a base line for comparing the cost of homes without having to make adjustments for the different sizes of properties.
Wales comes in third, with a 23.6% hike in prices per sq ft, followed by those in the east of England and the north west, with gains of 21.4% and 21.3% respectively.
The cost of a three to five-bedroom house has increased by 20.8% in the past four years in the south west, 20.3% in Yorkshire and the Humber, and 16.7% in the south east.
London, which comes in ninth place, saw the biggest increase in values per sq ft in monetary terms, with a jump of £71 to an average of £558. However, in percentage terms the rise was only 14.6%.
Scotland and the north east saw the lowest gains in property values on a per sq ft basis, at 14.5% and 9.6% respectively.
Which local authorities saw the highest growth?
At a local authority level, Merthyr Tydfil, just south of the Brecon Beacons National Park in Wales, saw the biggest increase in prices per sq ft, with a jump of 38.2%, or £34, during the past four years to leave the average family home there costing £123 per sq ft.
The Forest of Dean, in the south west, was not far behind with a 37.9%, or £64, rise in prices per sq ft to £233, followed by Tameside in the north west at 35.9%, or £52, to £197.
Nottingham and Birmingham completed the top five, with house prices per sq ft rising by 34.8% and 34.1% respectively during the period.
Overall, six of the local authorities that saw the biggest price increases were in the East and West Midlands.
What's the background?
The coronavirus pandemic is prompting many people to carry out a once-in-a-lifetime re-evaluation of their housing needs.
Successive lockdowns, combined with an increase in people working from home, is driving people to look for homes with more space. And demand for family houses with gardens, parking and extra space to work has intensified.
Our research shows people who are looking for more space, such as those with growing families, how three to five-bedroom houses are performing in terms of value.
Mortgage choice jumps to 11-month high
Borrowers now have the greatest number of mortgages to choose from since the first national lockdown came into force last March.
Mortgage choice has reached its highest level for 11 months as lenders launch a raft of new deals.
There are currently 3,215 mortgages to choose from, such as fixed rate and tracker mortgages, with different terms, interest rates and incentives.
That’s the highest number since March 2020, when the first national lockdown came into force. There were 5,222 mortgages in the market at that point.
And since October, the number of mortgages available has increased by 42%, the biggest four-monthly rise in choice since 2007, according to financial information group Moneyfacts.
Why is this happening?
Mortgage choice fell sharply in the first half of 2020, as lenders withdrew their mortgages while they reassessed the level of risk that they were prepared to take in the face of the Covid-19 pandemic.
Borrowers with only small deposits were hit particularly hard, with nine out of 10 mortgages for people borrowing 90% of their home’s value withdrawn between March and the end of June.
But the fact that choice is improving again, particularly for people with small deposits, suggests lenders are now less risk averse, while stable interest rates point to increased competition in the market.
Who does it affect?
First-time buyers
There was good news for first-time buyers, with the number of mortgages available to people with just a 10% deposit rising to 248, 88 more than in January.
First-time buyers have not only seen an increase in product choice, with the number of deals available for those with a 10% deposit nearly quadrupling during the past four months, but interest rates on the mortgages have also fallen.
In a further sign that competition is returning to this sector of the market, the average cost of a two-year fixed rate loan for someone borrowing 90% of their home’s value fell by 0.09% during the past month, while the cost of a five-year fixed rate deal dropped by 0.07%.
Despite these improvements, choice remains very limited for people with only a 5% deposit, with just five deals currently available, down from eight in January.
Existing homeowners
There is also good news for home-movers and people looking to remortgage, as the number of different deals available to choose from has increased significantly, with nearly 500 different mortgages available for people borrowing 60% of their home’s value.
The cost of a mortgage has also fallen for people with large equity stakes of at least 40% in their home.
After being on a steady upward trajectory during much of the second half of last year, interest rates charged on a two-year fixed rate mortgage for these borrowers have dropped by 0.05%, while rates on five-year fixed rate deals have fallen by 0.07%.
What’s the background?
In a further sign that the mortgage market is stabilising after a turbulent year, the number of days for which individual mortgages are available before lenders withdraw them rose from 28 days in January to 40 days.
The move is good news for potential borrowers as it gives them a better chance to secure the deal they want before lenders replace it with a different offer.
Eleanor Williams, finance expert at Moneyfacts, said: “This, coupled with overall average rates remaining quite static and availability continuing to improve, could imply the mortgage market is now the most stable it has been since the onset of the pandemic last year.”
Top three takeaways
- Mortgage choice has reached its highest level for 11 months as lenders launch a raft of new deals
- There are 3,215 different mortgages to choose from, a 42% increase since October
- The number of mortgages available to people with just a 10% deposit rose to 248, 88 more than in January
Rental demand soars in commuter belts
Our latest rental market report reveals tenants are looking for larger homes outside of city centres.
The search for space in the face of the Covid-19 pandemic is driving a mini-boom in the rental market, pushing rents higher, our latest Rental Market Report shows.
The ‘once in a lifetime’ reassessment of housing needs seen in the sales market is also influencing the rental one, as people look for larger properties in commuter zones or well-connected towns.
The rise in demand in these areas is pushing rents higher, with the average cost of being a tenant in the UK, excluding London, increasing by 2.3% year-on-year, putting rents back to pre-Covid levels.
Overall demand has risen by 21%, with houses letting 30% quicker than they were 12 months ago.
Despite these increases, affordability remains fairly stable, and you will need an average of 32% of your salary to cover your rent.
What’s happening in commuter areas?
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A halo effect has emerged in the wider commuter zones of the UK’s largest cities as tenants look for more space, both indoors and outdoors.
Rents in well-connected towns have registered strong growth, rising by 8.2% in Rochdale, 8% in Hastings, and 5.8% and 5.5% in Southend and Newport in Wales respectively.
By contrast, the easing in demand in cities across the UK has led to a slight softening of rents in these locations, with rents dropping by 1.8% in Edinburgh year-on-year, while they are 0.9% lower in Greater Manchester and 0.8% down in Greater Birmingham.
As a result, if you are coming to the end of your current lease in a city centre, you may be able to make some savings by finding a new property.
But while rents in central Birmingham fell by 3.4% year-on-year, the cost of being a tenant in the surrounding boroughs of Bromsgrove, Sandwell and Wolverhampton has risen by an average of 5%, buoyed by demand from renters who no longer need to commute on a daily basis.
If you are looking to move into a commuter area, be sure to shop around to make sure you secure the best rental deal.
You should also be prepared to move quickly, especially if you are looking for a family home, as these are being snapped up.
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Try to build up a rapport with local agents in your preferred area, so that they can alert you when new listings that meet your criteria come on to the market.
What’s happening in London?
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The impact of Covid-19 on the rental market has been amplified in London, with demand for properties in the capital down 10% year-on-year, on the back of working from home policies, reduced international travel and close to zero tourism.
These factors have led to rents in Greater London dropping by 8.3%, the steepest annual fall since the Global Financial Crisis.
But this fall is being exaggerated by declines in higher value, dense rental markets, such as Kensington and Chelsea.
By contrast, several outer London boroughs are still reporting rental growth, with the cost of being a tenant rising by 2.6% in the past year in Havering and by 1.1% in Enfield.
At the same time, the downturn in London rents is showing signs of easing, edging down by just 0.4% in December, the smallest monthly reduction since February 2020.
Meanwhile, new supply in London is up 30% year-on-year, creating more choice for potential tenants and exerting downward pressure on rents.
What’s the outlook?
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The outlook for the rental market depends to a large extent on how quickly a vaccine can reduce the impact of Covid-19 and enable normal business activity to resume, particularly in city centres.
Even then, flexible working is likely to continue, meaning there may be a permanent shift in priorities for some renters.
The demand for space is unlikely to diminish any time soon, which will continue to support the rental market for family homes.
Overall, the uncertainty created by the pandemic, rising unemployment and limited mortgage availability for buyers with small deposits will continue to drive demand for rented homes.
This demand, combined with a lack of new supply nationally, will support rental growth in the long run.
Our head of research, said: “Changing working, commuting and tourism patterns were felt very quickly in the central London rental market.
“Now we are seeing the impact in other city centres, although on a more modest scale. Balancing the rental declines in inner cities is the strong rise in rental growth in surrounding ‘halo’ areas and well-connected towns across the UK, reflecting stronger demand in many of these markets among a cohort of renters.
“Yet it is important to note that most demand among renters living in central cities is within the same area - some renters will have ties to an area through schooling, or non-office-based work.”
Revealed: how long it's taking buyers to complete in 2021
With housing transactions taking longer than normal to wrap up, find out how you can improve your chances of beating the stamp duty holiday deadline.
The average time it takes for a home sale to cross the line is now just under four months – around a fortnight longer than normal.
Most buyers who agreed a sale in 2020 would have expected to complete by 31 March 2021 under usual circumstances, according to our House Price Index.
However, the average time for an agreed sale to complete has surged from 90 days to 110-115 days.
Why are sales taking longer to complete?
The housing market was one of the bright spots of the economy last year, with 47% more sales agreed in the second half of the year than the same period in 2019. And this has led to a congested sales pipeline.
The stamp duty holiday, introduced last July, has boosted buyer appetite to move home.
The temporary tax break means that nearly nine out of 10 transactions are no longer subject to stamp duty, with the average bill falling by £4,500.
It’s set to run until 31 March, and with savings of up to £15,000 on offer, many buyers are now racing to beat the deadline.
The pandemic has prompted many people to carry out a once-in-a-lifetime re-evaluation of their home too, stimulating home moves and driving a search for space.
What does this mean if you’re hoping to take advantage of the stamp duty holiday?
There is a risk that up to 70,000 sales agreed in 2020 may miss the stamp duty holiday deadline, assuming a four-month completion period, according to our House Price Index.
What is not clear is how many buyers are dependent on the stamp duty holiday.
The more buyers rely on securing the tax break, the greater the risk of a spike in sales falling through if they don’t make the deadline.
If a stamp duty holiday extension fails to materialise, buyers across some housing chains may help to fund stamp duty costs for others in the chain to safeguard completions.
However, first-time buyers will still be able to make a saving after the deadline because under standard rules, they don’t pay any stamp duty on the first £300,000 on homes worth up to £500,000.
What can you do to improve your chances of securing the stamp duty holiday saving?
It’s all about getting prepared now to reduce potential delays.
From getting your paperwork in order, to setting realistic timelines, there are always ways to keep your keep your purchase on track. Check out our top tips for a smooth property transaction.
If you're in a property chain, it’s also worth getting your head around how to manage them. Our guide on how to keep your property chain intact is a handy read.
Your conveyancer plays a key role in the buying process. Our 10-step guide shows you exactly what you’re paying for and how they can help you.
Finally, don’t let industry jargon trip you up. Look up terms you don’t understand in our property jargon buster.
Could the government extend the stamp duty holiday?
While the government will be keen to start raising tax revenues once again, the case for a short, month-long stamp duty extension is growing, to help buyers who agreed a sale in 2020 to complete.
Around 55% of sales agreed in January would complete by the end of March in a normal year – but the proportion this year is likely to be lower.
A petition calling for the stamp duty holiday to be extended has received more than 100,000 signatures, triggering a debate to be held in Parliament.
Responding on behalf of the government, financial secretary to the Treasury, Jesse Norman, said that he could not comment on tax policy outside of a fiscal event, such as a Budget.
He added: “The government will continue to listen carefully to representations from the industry and from those who are planning to buy or sell a property.”