Aspiring homebuyers today welcomed the Chancellor announcement that they will receive extra help to get onto the ladder as he pledged a new mortgage guarantee scheme and an extension of the stamp duty holiday.
Rishi Sunak‘s fresh initiative will incentivise lenders to provide mortgages to first-time buyers as well as current home-owners with just 5 per cent deposits to buy properties worth up to £600,000. The Government will offer lenders the guarantee they require to provide mortgages covering the remaining 95 per cent.
And the stamp duty holiday extension was also welcomed by those hoping to move soon. It comes after the Chancellor exempted most buyers from the levy last July if they completed their transactions before March 31, 2021 – saving people up to £15,000 – and leaving would-be owners racing to meet the deadline.
That deadline has now been pushed back to the end of June to provide a further boost to the housing market. The stamp duty policy covers the sale of property worth up to £500,000 and will cost £1billion to implement.
Critics had argued that failing to extend the holiday would result in a cliff-edge, jeopardising hundreds of thousands of potential sales. The Government is hoping its new mortgage guarantee scheme will help to turn more of ‘generation rent’ into ‘generation buy’.
The Treasury said low-deposit mortgages had ‘virtually disappeared’ because of the economic impacts of the pandemic. The scheme, which will be subject to the usual affordability checks, will be available from April.
It is based on the Help to Buy mortgage guarantee scheme introduced in 2013 by David Cameron and George Osborne, which ran until June 2017 and aimed to reinvigorate the market following the 2008 financial crisis.
Here is what a range of aspiring first-time buyers told MailOnline today:
Ellie Stonell, 27, says the stamp duty holiday extension will save her and her boyfriend £15,000 on their Battersea home
Ellie Stonnell, 27, is renting a one-bedroom flat in Balham, South London, with her boyfriend James and had been keen for the stamp duty break to be extended to make sure she completes in time.
The couple had an offer accepted on a two-bedroom house in Battersea mid-February and are currently waiting on solicitor searches to be finalised and the outcome of a homebuyer survey.
Miss Stonnell had been hoping that the stamp duty holiday would be extended so she could make a £15,000 saving and use it to re-do the kitchen in her new home.
She said: ‘We had always planned to purchase a property in 2021, but the stamp duty holiday and potential saving certainly added a sense of urgency to our search for a new home.
‘With our rental contract coming to an end in April, we started looking at the end of last year and put in an offer on a two-bedroom house in Battersea mid-February.
‘Ideally, we would like to complete on the purchase and move into our new home by the end of April so we can avoid paying both rent and a mortgage at the same time.
‘Searching for the perfect home took us longer than expected. The market seemed unstable and we were conscious that we wanted to pay a fair price.
‘As a result of Covid, having an outdoor space has become more important, as has a second bedroom, to ensure our space is flexible and we can both work from home comfortably.
‘Our location however hasn’t been influenced by Covid. We anticipate working from the office once we are permitted to return, so we’re set on Battersea as it offers both an easy commute and easy access to lots of social things to do in our spare time.
‘We’re fortunate to have a deposit of 30 per cent which helped greatly with the mortgage application process, particularly at a time when high LTV mortgages were harder to come by for first-time buyers.
‘However, trying to beat the stamp duty holiday deadline of March 31 has created an extra administrative burden ensuring solicitor searches, home surveys and mortgage applications are progressing in a timely manner.
‘As it stands, the stamp duty saving of £15,000 is the difference between us being able to start renovations on the property soon after moving in, or having to delay.’
Holly Shaw and Daniel Saunders
Holly Shaw, 35, from Hampshire, and Daniel Saunders, 36, from Kent, with their now six-month-old daughter
Holly Shaw, 35, and Daniel Saunders, 36, had been worried that they would miss the March stamp duty deadline and said the extension would really help.
The couple sold their ground floor, two-bed maisonette in Canning Town, East London, through Purplebricks in November. They decided to sell partly to capitalise on the cuts to stamp duty.
Originally from Hampshire, Miss Shaw works as an NHS nurse and Mr Saunders, from Kent, is one of the control room managers of the London Ambulance Service.
The couple are moving to a four-bed detached home near Faversham in rural Kent because they have a six-month-old daughter and are eager to move closer to Mr Saunders’s family in the countryside to provide more space and better quality of life.
They were hoping to complete just ahead of the stamp duty deadline at the end of March, but they have had a lot of delays so the deadline being extended will now give them more time.
Miss Shaw said: ‘We went on the market in the summer ahead of our original schedule because of the stamp duty holiday and managed to sell our home in November and find a new place.
‘We’re aiming to complete before March 31, but everything has progressed a bit slowly.
‘Apparently solicitors and everyone are so busy because everyone has got the same deadline that it has taken a while.
‘We haven’t actually got a confirmed completion date yet, so the extension would be really handy to take that pressure away and give us a bit of breathing space.
‘It’s a big saving for us, we will save £15,000. It will mean we can have a smaller monthly mortgage payment and we will also spend some of it doing up the new place as the garden needs work.’
Bolu Sofoluwe, of London, bought her first home in January
Bolu Sofoluwe, 24, bought a one-bed flat at Harbard Close, Pocket Living’s development in Barking, East London in January, with a 15 per cent deposit.
But she said buying with a 5 per cent deposit would certainly have been of interest.
Pocket sells homes at least 20 per cent below market value to local first-time buyers.
Miss Sofoluwe said: ‘I got my keys on January 20 and moved in two weeks ago. I saved for about three years. I started saving straight after I graduated from university.
‘I graduated in July 2018 and I was doing an internship at a bank so I started saving from my internship salary, and then I got an offer to join the graduate scheme and part of that was that you got a signing bonus, so I put that towards my savings as well, and I’ve been saving ever since.
‘I was lucky to be living at home with my parents so I didn’t have many expenses, and since I started working from home I could save more as I wasn’t spending money on transport and food outside.
‘I’m usually based in Canary Wharf and my parents’ house is in Greenwich so I wanted to stay in London. I couldn’t imagine myself living anywhere else as I grew up for most of my life here.
‘I put down a 15 per cent deposit of £30,000, and I used the Lifetime Isa so the bonus contributed about £2,000 to that.
‘I think the Government is helping young people get on the ladder. There is shared ownership, Help to Buy, different savings accounts. They are definitely being proactive.
‘It is harder as a single person, I think it is easier as a couple, but it is definitely still possible. A lot of people are quite negative about it but maybe they just haven’t done enough research as it is still possible.
‘I would definitely look in to 5 per cent deposits if I was buying now, but because most mortgage lenders will only let you borrow 4.5 times your annual salary, I don’t think I would be able to get any more than 85 per cent loan to value.
‘It might not be that beneficial for a single person based on their salary but it will be more achievable for couples. It does give you hope, though, as it shows the Government is confident in the future of the housing market for them to back these loans and guarantees for mortgage lenders. It gives you more confidence to buy.
‘I considered putting my buying on hold until the pandemic was over as no job is guaranteed forever, but I think this will definitely give people more confidence to buy if the Government is willing to back it.’
Tom Lyes, 32, says Government-backed 5 per cent deposits will give him more cash to spend once he is able to travel
Tom Lyes, 32, a director of engagement, is looking to buy his first home in the next couple of years and says that help getting on the ladder with a 5 per dent deposit mortgage would be very welcome.
He said: ‘As a budding first-time buyer the 5 per cent deposit mortgages brings with it an air of optimism and excitement.
‘It will make a big difference for me in that having to pay a 10 per cent deposit means I use the vast majority of my savings with limited spending power going forwards.
‘Having been cooped up the last 12 months, I want to be able to spend on holidays, trips and events as it feels as though the social element of many of our lives have stalled.
‘The 5 per cent scheme will enable me to get my foot on the ladder without compromising and affecting what I can do in my life in the next couple of years.’
Katie Smith, 31, a PR consultant based in Maidenhead, is living in a small flat with a young baby to try to save a deposit to buy. She says a push for 95 per cent mortgages would help.
She said: ‘I live in a one bedroom rented flat in Maidenhead, Berkshire. I have deliberately stayed living in a small flat to keep my rent costs low in an attempt to save for a deposit.
‘Having spent nearly ten years living and working in London, and paying comparatively very high rents, moving to the commuter belt was a way for me to lower my outgoings and add to my savings pot.
‘Lockdown has helped grow my savings to some degree, but I also had a baby during lockdown which limited my income whilst on statutory maternity pay.
‘I have a nine-month-old baby so would be looking to skip a rung on the ladder and go straight to a three bedroom house, if I can. I desperately need the space as my daughter gets older.
‘The 5 per cent mortgage would definitely help me do this faster, not needing to save as much, and taking some of that financial pressure off. I have been saving now for about six years and I am still a way off. Once I pay rent, bills, my car, childcare, food and my student loan I really don’t have much to tuck away. I also don’t have the bank of Mum and Dad or any help from relatives.
‘My monthly mortgage would actually be roughly the same as the rent I am paying now, but the huge difference for me personally would be the ability to give my daughter her own bedroom and a garden to play in. Space is scarce when you are renting, and I won’t be taking any of it for granted if I do manage to buy a property.
‘I have many reservations [about 5 per cent mortgages] at this point: will the interest rates shoot up after a certain period; will the lending charge be extortionate; how will each loan differ per lender; will taking out such a high loan-to-value mortgage make it then much harder for me to remortgage at any point to a more competitive rate; will I eventually feel stuck?
‘I tend to always think if something is too good to be true, it usually is, so I will be approaching this with an air of caution. But I am sure it will be a risk I am prepared to take – when I think of my daughter growing up in this tiny flat, it’s just a no-brainer.
Victoria Chung, 35, a head of operations, and her partner Winward Chan are buying a one bedroom apartment at Lovell Homes’ Trinity Walk development in Woolwich, South East London. They are set to move in April.
She said: ‘It is the first time we’re buying, and we are using Help to Buy. We rented for a long time and it just makes sense for us not to spend all that money on rent any more.
‘We’re buying a one-bed apartment at Trinity Walk in Woolwich. We initially thought we wouldn’t make the stamp duty holiday deadline because we are set to complete in April. I think we will save around £3,000 now the holiday has been extended.
‘We will use the savings to buy things for our new home. We’ve been renting for a long time and we don’t have any furniture so a bed is the priority!
‘However, the Help to Buy scheme subjects you to new builds, so I think the home we are buying is automatically more expensive than anything else in the area. I think it would make sense for first-time buyers if the Government made it so the scheme wasn’t limited to new builds.’