Help to Buy equity loan scheme extended for second time
The government has pushed back the deadline by a further month to help buyers whose new homes have been hit by coronavirus delays.
The government has extended the deadline for the current Help to Buy initiative for a second time due to building delays caused by the coronavirus pandemic.
The so-called qualification deadline – the date by which construction of the property must have been completed – has been pushed back by a further month until 31 March 2021.
The deadline for legal completion for homes being bought under the scheme remains unchanged at 31 March 2021, although under certain circumstances it can be put back until 31 May 2021.
The Help to Buy equity loan scheme enables people to purchase a new-build home with just a 5% deposit, with the government topping this up with a 20% loan that is interest-free for five years.
The current scheme is being replaced by a new version, which is only available to first-time buyers, on 1 April this year.
Why is this happening?
The scheme is being extended for a second time due to the disruption caused to the housebuilding industry as a result of lockdowns and social distancing measures introduced to combat Covid-19.
Despite the qualification deadline having previously been extended by two months, there are still fears that many families hoping to take advantage of Help to Buy could miss out due to delays in their home being constructed.
As the current scheme ends on 31 March and the new one is only applicable to first-time buyers, there was a danger that many people could lose the chance to buy their home, through no fault of their own, if the deadline was not extended.
Who does it effect?
Although the deadline has been extended, it does not apply to everyone.
If you had reserved a property through the scheme by 30 June 2020, the deadline by which the property must be built has been extended until 31 March.
Under certain circumstances the date for legal completion can also be extended from 31 March until 31 May 2021, if building work was severely delay due to the first national lockdown. But housebuilders must receive approval for this delay from Homes England, the government’s housing coordinator.
If you reserved your home on 1 July 2020 or later, you will still benefit from an extension of the qualifying deadline until 31 March, but you must also be able to legally complete your purchase and receive the keys to your property to move in on that date.
If your home has not been built and you cannot move in on 31 March, or by 31 May for those who qualify for the later deadline, you will not be able to qualify for the Help to Buy equity loan.
Your housebuilder must unconditionally release you from your contract and refund your reservation fee. If you have already received an Authority to Proceed from Homes England, your builder is entitled to make certain deductions, but they must tell you about these first. If you have already exchanged contracts, they must also return your deposit.
The Help to Buy equity loan scheme in its current form will still close on 31 March.
What’s the background?
The new Help to Buy equity loan scheme, which is already open to applications, will only apply to first-time buyers.
It will also see the introduction of regional price caps on the value of a property that it can be used to purchase.
These caps range from £186,100 in the north east to £437,600 in the south east and £600,000 in London.
The scheme will run from 1 April 2020 to 31 March 2023.
Top three takeaways
- The government has extended the deadline for the current Help to Buy initiative for a second time
- The so-called qualification deadline has been pushed back by a month until 31 March 2021
- The deadline for legal completion remains unchanged at 31 March 2021, although under certain circumstances it can be pushed back until 31 May 2021
Q&A: 'With the stamp duty holiday due to end in March, we expect to see this housing market activity intensify'
Our Head of research, takes stock of the housing market and reveals info from the latest House Price Index.
Q. Gráinne, what’s happening to house prices across the country?
A. House prices are rising at nearly 4% a year, with the average home now worth £222,900. To put this into context, this is the highest level since August 2017. But the UK headline rate of growth hides a varied regional picture, with growth ranging from 5% in the north of England to 2.8% in the east of England.
House price growth in many areas has been prompted by a mismatch between supply and demand. We have seen demand levels rise by an average of 40% year-on-year, and in some areas by much more, and that’s despite the closure of the housing market during the first national lockdown.
But the flow of homes coming onto the market last year was just 4% more than in 2019. Put simply, there aren’t enough homes for sale to soak up demand – and this is putting upward pressure on house prices.
Our data and forecast models suggest annual house price growth will rise to 5% and then stay there for the first three months of this year.
Q. 2020 was a tumultuous year. So why was there record demand for housing?
A. The housing market was one of the bright spots of the economy last year. The pandemic and its subsequent lockdowns and restrictions led many people, who had spent longer than usual in their homes, to carry out a once-in-a-lifetime re-evaluation of their home and lifestyle, stimulating home moves and driving a search for space, such as an extra bedroom or office space.
This has been captured in our data, which reveals that there were 9% more new sales agreed in 2020 than in 2019. And because it typically takes three to four months to legally complete on a sale, a slice of these deals will spill over into 2021.
We also saw a shift in the type of buyers active in the housing market. More people in wealthier areas, where house prices are typically higher, are planning a move. On the other hand, some first-time buyers have been hit by many lenders pulling their mortgages for borrowers with small deposits.
All of which means that the total monetary value of sales agreed in 2020 is 26% higher than 2019, bringing the annual figure to over £300bn.
Drilling down into the data, it’s worth noting that sales activity in the south of England in particular is coming off a historically low base. So last year’s bounce-back in general housing market activity, combined with higher selling prices, means that the total value of homes sold in the south east and east of England is up 37% on 2019.
Q. What’s the most sought-after type of property?
A. While the value of all types of property is climbing, the search for space that I mentioned is having a knock-on effect on prices.
It has prompted the value of houses to rise twice as much as flats, with the average rate of year-on-year growth for houses standing at 4.3% compared with 1.8% for flats.
Q. Traffic on Zoopla surged by 70.5% on Boxing Day. What does this mean for the months ahead?
A. There’s traditionally a spike in interest in moving home on Boxing Day as people turn their attention to the year ahead. But this most recent seasonal surge was far higher than the 61% increase recorded on Boxing Day in 2019.
And the momentum seems to be sustained, with searches on Zoopla for December up until 26th up 33% on the same time period the year before.
With the stamp duty holiday due to end in March, we expect to see this housing market activity intensify as buyers focus their efforts on securing the tax saving.
Home repossessions set to be put on hold until April
Calls to extend the ban on home repossessions come after a third national lockdown was introduced earlier this month.
Home repossessions are set to be put on hold until April following the introduction of new lockdown measures across the UK.
Regulator the Financial Conduct Authority (FCA) has proposed lenders should not act on repossession orders and take back people’s homes until at least 1 April.
The moratorium on repossessions would apply to both homeowners and landlords of buy-to-let properties.
While the proposal has been put out to consultation until 18 January, it has already received the support of trade body UK Finance, which represents mortgage lenders.
Eric Leenders, managing director of personal finance at UK Finance, said: “The banking and finance industry is committed to providing ongoing support to those facing financial difficulty as a result of the pandemic.
“The industry is fully supportive of a moratorium on possessions remaining in place until 1 April 2021 to ensure customers do not lose their home at this difficult time.”
Why is this happening?
The FCA had previously called for lenders not to enforce repossession orders before 31 January, except in exceptional circumstances.
It is proposing extending this guidance until 1 April due to the worsening coronavirus situation in the UK and the government’s new lockdown measures.
It said the latter meant people could experience significant harm if they were forced to move because their home was repossessed.
What support is available?
Mortgage lenders have introduced a range of support measures to help homeowners and landlords whose finances have been impacted by the pandemic.
The option of taking a mortgage payment holiday, under which people can defer making their monthly repayments for up to six months, has been extended until 31 July, although consumers will have to apply by 31 January if they want a full six-month deferral.
For borrowers who have already taken a six-month payment holiday, lenders are offering tailored support, including accepting reduced payments for a period of time, switching them to an interest-only mortgage or extending their mortgage term.
More than 2.7 million mortgage payment holidays have been arranged since the scheme was first launched last March, with around 127,000 deferrals in place in mid-November 2020.
What should I do if I can’t pay my mortgage?
If you are struggling to keep up with your mortgage payments it is important to contact your lender as soon as possible, as you will have fewer options if you are already in arrears.
If you want to take out a mortgage payment holiday, follow the instructions on your lender’s website, as many lenders have set up an online application process.
If you want to request a different option, such as switching to an interest-only mortgage, you should contact your lender directly.
What’s the background?
The proposal to put repossessions on hold until April follows a similar move to ban tenant evictions until at least 21 February 2021 in England, and 31 March in Scotland and Wales.
The only exception to the ban is for evictions due to anti-social behaviour, illegal occupation, fraud or rent arrears.
Landlords are also required to give their tenants a six-month notice period if they want to evict them until at least 31 March.
Top three takeaways
- Repossessions are set to be put on hold until April following the introduction of new lockdown measures across the UK
- While the proposal from the FCA has been put out to consultation until 18 January, it has already received the support of trade body UK Finance
- The moratorium on repossessions would apply to both homeowners and landlords of buy-to-let properties
Lockdown 2021: ban on tenant evictions extended until February
The government has extended the ban on bailiff evictions for a further six weeks.
Tenants in England are being protected from eviction for at least a further six weeks.
The government is extending the ban on bailiff evictions for all but the most extreme cases until at least 21 February 2021.
The only exception to the ban is for evictions due to anti-social behaviour, illegal occupation, fraud or rent arrears of more than six months, as well as cases of domestic abuse in the social sector.
Communities secretary Robert Jenrick said the measures would be kept under review, and landlords would be required to give a six-month notice period to tenants until at least 31 March.
A pilot scheme is also being launched in February to offer mediation between landlords and tenants facing court proceedings for eviction to try to help the two parties reach a mutual agreement that keeps people in their homes.
What’s the background?
The government first introduced a ban on tenant evictions in England in March last year. Court eviction hearings were also put on hold.
The ban ended in September, but a new grace period was introduced between 11 December and 11 January in England and Wales to ensure no-one was evicted during the festive period.
Evictions were 86% lower between July and September 2020 than they had been in the same period of the previous year, while no repossessions were recorded between April and the end of September, down from 14,847 a year earlier.
Who does the new agreement affect?
England
Under the latest extension of the ban, tenants in England cannot be evicted until after 21 February, although the government said in reality, it did not expect any evictions until 8 March at the earliest.
Landlords will also have to give their tenants at least six months’ notice if they are being evicted before 31 March.
Wales
Tenants in Wales have been given even more breathing space, with the ban on evictions extended until the end of March.
Evictions will still go ahead, however, in cases of anti-social behaviour or domestic violence.
Scotland
The latest ban on evictions does not impact tenants in Scotland as they are already protected under separate legislation.
In September, Nicola Sturgeon’s government extended its coronavirus-related eviction ban until March 2021.
What are my rights as a tenant?
It is illegal for a landlord to evict you without giving you written notice or obtaining a court order.
If you are in an assured shorthold tenancy, the most common type of tenancy, they can start the eviction procedure through giving you either a section 21 or section 8 notice.
Your landlord does not need to give a reason to evict you under a section 21 notice, but they must give you a warning period, which is currently of six months, and you cannot be issued with a section 21 notice during the first four months of your original contract.
If you do not leave the property at the end of this period, your landlord must go to court to evict you legally.
Landlords can only issue a section 8 notice if they have legal grounds to end your tenancy, for example if you are in rent arrears. They must apply to a court for a possession order to evict you.
A landlord is not allowed to harass you or lock you out of your home, even temporarily, while they are waiting to evict you.
For more on your rights as a renter, read our guide here.
What should I do if I can’t pay my rent?
If you are struggling to pay your rent, it is important to talk to your landlord as soon as possible.
If you can still afford to pay some of your rent, ask your landlord if they would accept a reduced payment for a period of time, particularly if you think you will be able to make up the shortfall once your finances have recovered.
It is also be worth checking to see if there are any government benefits available to you.
The government has made £180m available for Discretionary Housing Payments which councils can distribute to support renters who need help with their housing costs.
Top three takeaways
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Tenants in England will be protected from eviction for at least a further six weeks
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Similar measures have been announced in Scotland and Wales
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People struggling to pay their rent are advised to talk to their landlord as soon as possible and check whether they are eligible for any benefits
Overhaul of leasehold system could save homeowners thousands of pounds
The government is reforming the system to make it easier and cheaper for leaseholders to extend their leases.
Millions of homeowners with leasehold properties will be given a new right to extend their lease in a major shake-up that could see some households save tens of thousands of pounds.
Housing secretary Robert Jenrick has announced that people with leasehold homes in England will be given the right to extend their lease by up to 990 years at zero ground rent.
He said that the measures come as "part of the biggest reforms to English property law for 40 years, fundamentally making home ownership fairer and more secure".
Unlike a freehold property, people with a leasehold property do not own their home outright, but only have the right to live there for a set period of time, with leases typically running for between 99 and 125 years. The land on which a leasehold property sits is owned by a freeholder.
Homeowners can extend their leasehold or even buy their freehold, but the process can be complicated and expensive.
Leaseholders also have to pay annual rent – known as ground rent – to the freeholder.
Under the current law, many leaseholders face high ground rents, which the owner of the land can increase without having to provide any justification.
Why is this happening?
An estimated 4.5 million homeowners have a leasehold property.
In the past, leasehold properties tended to be restricted to flats, but there has been a growing trend among developers to sell houses on a leasehold basis as well.
A report on the issue by the Housing, Communities and Local Government Committee warned that in some cases ground rents had doubled every 10 to 15 years.
At the same time, issues relating to leases can also lengthen the time taken to buy or sell a property and increase the costs involved.
Mark Hayward, chief policy adviser at Propertymark, said: “The issue of escalating ground rent on leasehold homes has been a long-term scandal which has left many owners trapped and unable to sell their houses.
“This new legislation will go a long way to help thousands of homeowners caught in a leasehold trap.”
What’s changing?
Under current rules, leaseholders of houses can only extend their lease once for 50 years with a ground rent.
Leaseholders of flats can extend as often as they want at zero, or so-called peppercorn, ground rent for 90 years.
The new changes will mean that both leaseholders of flats and houses will be able to extend the lease on their home to a new standard term of 990 years and no longer pay any ground rent.
The government estimates the overhaul could save leaseholders thousands, and even tens of thousands, of pounds.
A Commonhold Council will also be set up to prepare homeowners and the market for the widespread take-up of commonhold as an alternative to leasehold.
A commonhold model allows homeowners to own their property on a freehold basis, with blocks of flats jointly owned and managed.
What else is happening?
An online calculator will be introduced to make it simpler for leaseholders to find out how much it will cost them to buy their freehold or extend their lease.
The government is also abolishing certain other costs associated with buying a freehold or extending a lease, while it will set the calculation rates in a bid to ensure the process is fairer, cheaper and more transparent.
It has previously been announced that ground rents on new leases on homes will be restricted to zero.
This rule will now be extended to apply to all new retirement properties.
The legislation will be brought forward in two parts. The first part, which will set future ground rents to zero, will be introduced in the upcoming session of Parliament, with the other changes, such as those relating to commonhold, brought forward in due course.
Top three takeaways
- Millions of homeowners with leasehold properties will be given a new right to extend their lease by up to 990 years
- Changes could see some households save tens of thousands of pounds
- All new retirement homes will also be sold without a ground rent
Housing market to stay open in January lockdown
People can continue to view properties and move home despite the latest lockdown measures.
The Prime Minister has announced a new national lockdown in England in a bid to control soaring coronavirus cases.
People are only allowed to leave home for limited reasons, while non-essential shops and schools must close. Similar measures have been introduced in Scotland and Northern Ireland.
The housing market will remain open, and people can continue to buy, sell, rent or let properties, as long as government guidelines are followed.
Mark Hayward, chief policy advisor at industry body Propertymark, said: “We welcome the news that the housing market is to remain open throughout this new lockdown period, but it is essential that all agents continue to play their part in reducing the spread of the virus by following all relevant guidance on how to safely conduct viewings.”
Experts suggest the new restrictions are expected to remain in place until the middle of February and will only be lifted if the pressure on hospitals improves.
Will the housing market stay open in lockdown?
Yes, the housing market will remain open. Viewing a property or moving home has been classed as one of the limited exceptions under which people are allowed to leave their home under the new guidance.
Other services required for the home buying, selling and moving process, such as solicitors, valuers, surveyors and removals firms, can also continue to operate.
But it is important to note that social distancing measures must be observed when viewing properties or moving home.
Will estate agents stay open in lockdown?
Estate agents and letting agents will remain open but members of the public will have to follow certain rules if they want to visit their offices.
For example, you may be required to make an appointment and you must wear a suitable face covering during the visit.
If you want to list your property for sale or rent, agents can still visit your home to take photographs and measurements, but social distancing measures must be followed, such as wearing a suitable face covering, keeping internal doors open and staying two metres away from people who are not part of your household.
If you or any member of your household is showing symptoms of Covid-19 or are self-isolating, estate agents and potential buyers should not visit your property in person.
Can I still view properties during lockdown?
If you are looking to buy or rent a new home, you can continue to view properties, as long as social distancing measures are followed, including wearing a suitable face covering.
Viewings can only be done by appointment and ‘open house’ viewings are not allowed.
You should wash your hands regularly or use hand sanitiser and avoid touching surfaces wherever possible. If you can, it is better not to bring children with you.
All internal doors of the property being viewed should be left open, and surfaces, such as door handles, should be cleaned after each viewing. Windows should be kept open to ensure maximum ventilation.
It is also recommended that property owners wait outside while viewings are taking place to minimise unnecessary contact.
Many estate agents will be offering online or virtual viewings in the first instance and it is recommended that people only view a property in person if they are seriously considering making an offer on it.
Similar measures apply to the viewing of show homes.
What does the new lockdown mean if I am moving home?
Home moves are allowed to go ahead but people outside of your household or support bubble should not help with the move.
Removal firms can continue to work during the latest lockdown, however, social distancing measures must be observed to help keep everyone safe.
These measures include doing as much packing as you can yourself, cleaning your belongings before removals workers arrive, keeping internal doors open and ensuring a distance of two metres is kept between you and the removers where possible.
Everyone should wash their hands regularly or use hand sanitiser and avoid touching surfaces.
You should not provide refreshments for removers, but should ensure they have access to handwashing facilities, as well as separate towels or paper towels on which to dry their hands.
You are allowed to spend a night in a hotel or other similar accommodation while you are in the process of moving home if necessary.
The government has asked people to be as flexible as possible and be prepared to delay moves if someone involved in the process needs to self-isolate or if someone in the property you are moving into has Covid-19.
Top three takeaways for moving house during lockdown:
- You can still move home. People outside your household or support bubble should not help with moving house unless absolutely necessary.
- Estate and letting agents and removals firms can continue to work. If you are looking to move, you can go to property viewings.
- Follow the national guidance on moving home safely, which includes advice on social distancing, letting fresh air in, and wearing a face coverings.
Homeownership rate falls among young people
The past decade has seen a drop in the number of people aged under 45 who live in their own home, according to the English Housing Survey.
The proportion of people aged under 45 who own their own home has fallen by more than 10% during the past decade.
Only 56% of people aged between 35 and 44 in England were owner-occupiers in 2019-2020, down from 67% 10 years earlier, according to the government’s English Housing Survey.
Younger age groups were even less likely to own a property, with only 41% of those aged between 25 and 34 living in their own home.
The drop in homeownership among younger people comes despite a raft of schemes being launched by the government in recent years to help people get on to the property ladder.
Instead, 42% of people aged between 25 and 34, and 27% of those in the 35 and 44 age group lived in the private rented sector, up from just 17% 10 years ago.
Why is this happening?
The fall in the number of younger homeowners during the past decade is likely to have been driven by changes to the mortgage market.
The majority of mortgages for people with small deposits were withdrawn during the financial crisis and were slow to be reintroduced.
At the same time, new affordability rules also made it harder for younger people on lower salaries to qualify for a mortgage.
Meanwhile, house price growth has outstripped increases to average earnings during much of the past decade, leading to increasingly stretched affordability.
Who does it affect?
Affordability constraints were reflected in the fact that only 19% of people who bought their first home last year did so on their own, with couples accounting for the majority of those who got on to the property ladder.
First-time buyers put down an average deposit of £42,433, while 62% of those buying their first home in 2019-20 had an income that put them in the top 40% of earners nationally.
Despite this fact, just under half of first-time buyers opted for a mortgage repayment term of 30 years or more, with only 4% having a term of 19 years or less.
What’s the background?
Despite the high deposits first-time buyers put down to get on to the property ladder, there was a fall in the level of support they received from the ‘bank of mum and dad’.
Around 85% of people used their own savings to fund their home purchase in 2019-20, up from 76% in 2017-18.
By contrast, only 28% received financial help from family or friends, down from 39% two years earlier.
A further 6% said they used money they had inherited for their deposit.
Top three takeaways
- The proportion of people aged under 45 who own their own home has fallen during the past decade
- Only 56% of people aged between 35 and 44 were owner-occupiers in 2019-2020, down from 67% 10 years earlier
- The drop comes despite a raft of schemes being launched by the government in recent years to help people get on to the property ladder.
Mortgage approvals reach highest levels since 2007
The scramble for property continues as buyers rush to take advantage of the stamp duty holiday.
Mortgage approvals soared to a new 13-year high in November as the property market showed no signs of slowing down.
A total of 105,000 mortgages were agreed for people purchasing a home, the highest level since August 2007, according to the Bank of England.
Approvals were up from 98,300 in October (also a 13-year high) and broke through the 100,000 barrier for the first time in 13 years.
The increase comes as lenders continue to expand on the number of mortgages available for first-time buyers.
There are currently 160 different deals available for people with a 10% deposit, up from a low of 51 in October last year, but still significantly below the 762 that were available in January 2020, according to the latest figures from Moneyfacts.
Why is this happening?
The buoyant mortgage approval figures suggest the mini boom in the housing market still has further to run.
The high level of transactions has been sparked by a combination of the stamp duty holiday on homes costing up to £500,000, alongside people re-evaluating their housing needs following lockdowns and periods of working from home.
Meanwhile, the rise in mortgage products for buyers with small deposits indicates lenders are feeling less risk-averse than they were in the early days of the coronavirus pandemic, when many of these deals were taken off the market.
Who does it affect?
The increase in mortgages for people borrowing 90% of their home’s value is good news for first-time buyers. But while the availability of these mortgages has increased, there are still very few options for people with only a 5% deposit, with just eight different 95% mortgages currently available.
Although product choice for people with a 10% deposit has increased, the cost of the deals remains significantly higher than this time last year. The average interest rate is now 3.65% for a two-year fixed rate mortgage, compared with 2.59% a year earlier, despite the Bank of England base rate falling by 0.65% during the period.
Mortgage rates are even higher for people with just a 5% deposit, averaging 4.44% on a two-year fixed rate loan, up from 3.25% in January 2020.
What’s the background?
Our data suggests the current mini housing market boom still has further to run.
Buyer demand was 33% higher in December than it was in the same month of 2019, according to our latest House Price Index.
Meanwhile, a record Boxing Day bounce saw traffic on our property search portal surge by 70.5%, considerably higher than the 61% jump seen a year earlier.
But the market is expected to start slowing down in the second quarter of this year once the stamp duty holiday ends on March 31 and unemployment rises as government support measures are withdrawn.
Top three takeaways
- Mortgage approvals for house purchases soared to a new 13-year high in November as the property market showed no signs of slowing down
- A total of 105,000 mortgages were agreed for people purchasing a property, the highest level since August 2007
- The number of mortgages available to people with a 10% deposit has increased to 160 from a low of 51 in October last year
Government rules out stamp duty holiday extension in 2021
With the stamp duty holiday due to end on 31 March 2021, the government has reacted to calls for an extension. What it means if you’re planning to buy or sell a home next year.
The government has responded to calls for an extension to the stamp duty holiday by stating it has no intention to extend the tax relief.
The stamp duty holiday is due to come to an end on 31 March 2021, despite repeated industry calls for an extension and a petition to parliament with more than 28,000 signatories.
Responding to the petition, the government said: “As the relief was to provide an immediate stimulus to the property market, the government does not plan to extend this relief.
“Stamp duty is an important source of government revenue, raising several billion pounds each year to help pay for the essential services the government provides.”
What’s the background?
The stamp duty holiday was introduced in July 2020 by Chancellor Rishi Sunak in a bid to boost the housing market in England and Northern Ireland during the coronavirus pandemic.
Under normal circumstances, buyers pay stamp duty land tax when buying a property worth £125,000 or more, although first-time buyers only have to pay it on homes above £300,000.
The introduction of the stamp duty holiday raised the threshold at which the tax kicks in to £500,000 for all buyers, amounting to a potential saving of up to £15,000.
Can I still buy before the stamp duty holiday ends?
Yes, but you’ll need to move fast. The time it takes between agreeing a sale and completing is normally just under 100 days.
Our research shows that only 54% of sales agreed in January will complete in time, with that figure dropping to 17% in February.
From getting your paperwork lined up in advance, to smoothing out any wrinkles that may disrupt your property chain, here are our top tips to help you beat the deadline.
What happens when the stamp duty holiday ends?
Once the stamp duty holiday ends on 31 March next year, the former stamp duty rules will apply.
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.
“The government is committed to supporting home ownership and helping people get on and move up the housing ladder,” it said.
“When the stamp duty holiday ends, the government will maintain a stamp duty relief for first-time buyers which increases the starting threshold of residential stamp duty to £300,000 for first-time buyers that purchase a property below £500,000."
How much stamp duty will I pay after 31 March 2021?
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:
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0% up to £125,000
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2% on £125,001-£250,000
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5% on £250,001-£925,000
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10% on £925,001-£1.5m
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12% on any value above £1.5m.
For example, if you buy a flat for £275,000, the stamp duty you owe would be:
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0% on the first £125,000 = £0
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2% on the next £125,000 = £2,500
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5% on the final £25,000 = £1,250
Total stamp duty = £3,750
First-time buyers after 31 March 2021
Stamp duty relief was introduced in November 2017 for first-time buyers to help people step onto the property ladder.
First-time buyers are exempt from 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:
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0% on the first £300,000
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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:
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0% on the first £300,000 = £0
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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.
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.
What about 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.
What other government support is available?
During the second lockdown, the government extended its offer of mortgage payment holidays. Those who need help paying their mortgages can still request a holiday of up to six months until 31 March 2021.
To help first-time buyers get on the property ladder, the government's Help to Buy scheme offers an equity loan of up to 20% of the property value (40% in London). As long as you can raise a 5% deposit, you can then apply for a standard mortgage to pay the remaining amount.
At the Conservative party conference in October, Prime Minister Boris Johnson pledged to “turn generation rent into generation buy” and announced plans for a new scheme to give more people the chance to take out long-term fixed rate mortgages for up to 95% of their home’s value - although details have not yet been released.
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:
Scotland
From April 2015, Stamp Duty was replaced by Land and Buildings Transaction Tax (LBTT) in Scotland.
In Scotland, the LBTT rates are:
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0% up to £145,000
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2% on £145,001-£250,000
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5% on £250,001-£325,000
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10% on £325,001-£750,000
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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:
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0% up to £180,000
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3.5% on £180,001-£250,000
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5% on £250,001-£400,000
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7.5% on £400,001-£750,000
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10% on £750,001-£1.5 million
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12% on any value above £1.5 million
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.
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Buyer demand soars by 40% in 2020
As the rollercoaster year draws to a close, the total value of homes changing hands in 2020 is 26% higher than in 2019, according to our House Price Index.
The total value of homes changing hands is set to jump by £62bn in 2020 as buyer demand soars by 40%.
Sales have been agreed on more than £300bn worth of property this year, that's 26% higher than in 2019, as successive lockdowns have caused people to re-evaluate their housing needs.
The high levels of buyer demand, combined with a shortage of homes for sale, has pushed annual house price growth up to a three-year high of 3.9%.
The jump leaves the average home costing £222,900, according to our latest House Price Index.
What’s happening to house prices?
UK house price growth has increased to 3.9%, its highest level since August 2017, and up from 1.3% a year ago.
The impetus for the growth is coming from northern England and Wales, where property remains more affordable.
On a city level, Manchester led the way, with property values rising by 5.7% during the past year, closely followed by Leeds at 5.6%, Nottingham at 5.4% and Liverpool at 5.3%.
All cities monitored by our House Price Index recorded annual gains apart from Aberdeen, where prices dropped by 2.6%.
Regionally, the north west recorded the strongest growth, with average house prices increasing by 5% year-on-year, followed by Wales and Yorkshire and the Humber, both at 4.9%.
Is buyer demand still strong?
The housing market looks set to end the year on a strong note, with buyer demand currently 33% higher than it was in December 2019, as the market defies the traditional seasonal slowdown.
The pandemic has driven a ‘seismic’ search for space and quality location. And demand for family housing with gardens, parking and extra space to work from has continued to rise.
Despite the shutdown of the housing market earlier this year, the ‘once-in-a-lifetime’ reassessment of property has seen buyer numbers soar by 40% across the whole of 2020, compared with the previous year.
What’s happening with property sales?
The strong levels of demand are proving to be committed, rather than speculative, and are converting readily into sales agreed.
Sales levels have jumped by 9% during 2020, compared with 2019, although with transactions taking three to four months to complete, a portion of these will spill over into 2021.
The rebound in sales has been strongest in the south east and eastern England, where they are more than 20% higher than in 2019.
But the strong demand has not been matched by an equal rise in new listings, with the number of properties for sale increasing by only 4%, creating a mismatch between supply and demand and putting upward pressure on prices.
What’s next for the housing market?
Housing market activity remains well above normal levels for this time of year, and this momentum is expected to lead to a strong start in 2021.
Looking ahead, our research and insight team expects annual house price growth to reach 5% in February, before slowing to 1% by the end of 2021, as demand starts to weaken during the second half of the year.
Buoyed by the strong start to the year, the number of completed property transactions is likely to be broadly similar to this year at 1.1 million.
Richard Donnell, director of research and insight at Zoopla, said: “The ‘once-in-a-lifetime re-assessment of housing’ kickstarted by the pandemic has further to run in our view and this will support demand into 2021.
“With a long Christmas weekend, and many households isolating in smaller groups, we expect interest in housing to be stronger than usual ahead of the traditional Boxing Day bounce, when interest in housing jumps.”
But Donnell warned that while market activity is being boosted by latent demand unlocked by the pandemic, the housing market is not immune to economic forces and rising unemployment.
He added: “Economic pressures are already impacting in parts of the market, reducing the volume and share of sales in less wealthy areas, for example.”