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What does the new budget mean for home buyers?

The latest budget has some big wins for home buyers, with the Stamp Duty Holiday extension and 5% mortgages, but not everyone may make the deadline.

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The new budget had some big news for home buyers. It may not have come as a surprise — this budget was bound to tackle the recovery from the pandemic, and throughout the past year, the government has shown they are committed to keeping the housing market afloat. The original stamp duty holiday kept the property market buzzing — and now it’s been extended. Plus, the government has moved one step closer to keeping its Generation Buy promise by bolstering mortgages with only a 5% deposit. 

It might feel like there’s a lot of information coming your way. So what does it all mean? And how can you tell if you'll benefit from the new measures? We’ll go behind the headlines to try to unpack how the new budget will shape home buying — whether you’re in the middle of a purchase or just considering a move. Let's get started.

Who will benefit from the Stamp Duty Holiday extension?

The announcement that the Stamp Duty Holiday would be extended wasn't a shock — the rumours had been flying for weeks. It now will run through September, though the benefit will taper off as we get closer to the end of the extension. And it’s great news for those who are in the middle of a sale. Many people rushed to buy after the first lockdown, but there was a huge backlog which meant some sales have been taking longer than normal.

So a lot of people who thought they would make the March 31 deadline found themselves looking at a stamp duty bill that they haven’t budgeted for. For those people, this will be a big relief.

With the new plan, you'll benefit from the current holiday through the end of June and then a tapered rate through the end of September.

Basically, you'll still face no stamp duty on the first £500,000 if you complete before the end of June. If you complete from July through the end of September, you'll pay no stamp duty on the first £250,000, before rates go back to normal in October. (We know, it's a little confusing. Always check with HMRC if you're not sure of your tax — it's much better to be safe than sorry.)

But if you haven’t started the home buying process yet, it’s important to be realistic. Although the deadline has been extended for three months, the average timeline for buying a house normally starts at about 15 weeks — and it can take far longer. And the budget is likely to keep the housing market busy, so it may be tricky to make the deadline.

We think it’s always better to budget for the full cost of stamp duty unless you’re sure you’ll be exempt. You can learn all about stamp duty — and how much it can cost — in our stamp duty guide.

The new budget shows clear signs that the government wants to keep the housing market moving."

Why are 5% deposits so important?

One exciting announcement was the new guarantee for 5% deposits. Essentially, the government will be guaranteeing loans so banks feel comfortable loaning up to 95% of a home’s value.

Why is this important? For a lot of people, saving up a deposit is the biggest hurdle to getting on the property market. So, in theory, this will help a lot of first-time buyers get on the ladder — part of the government’s plan to turn “Generation Rent” into “Generation Buy”. It looks like this will only be available on homes up to £600,000, which is far over the average home price — so it could be a huge help to new buyers. Some 5% deposit mortgages were incredibly hard to come by in the last year, and it often felt like deals were changing by the hour.

One concern is that this will increase demand and ultimately drive prices up — especially in the midst of an extended Stamp Duty Holiday. We also don’t know how banks will implement these loans or what the rates will look like. But for those who have been struggling to save, it could be a game-changer.

There's a lot to consider from the goverment's latest announcement. The new budget shows clear signs that the government wants to keep the housing market moving. There are big incentives for buyers with the extension of the stamp duty holiday and 5% deposit guarantees — and demand looks set to remain high. This could mean high prices, which create their own barrier to homeownership, but for some struggling to get on the housing ladder, there are real opportunities to be had. It's all down to your personal circumstances, but it's might be a great time to start looking.

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