Budget 2021

Budget 2021: Specialist finance industry reacts to SDLT holiday extension and mortgage guarantee scheme

Chancellor of the exchequer Rishi Sunak has today (3rd March) delivered his Budget to the House of Commons, setting out plans to protect jobs as the UK emerges from the coronavirus crisis.

The Budget was delivered weeks after prime minister Boris Johnson announced his four-step roadmap out of lockdown in England. 

Some of the key announcements included the extension of the stamp duty holiday for property worth up to £500,000 until 30th June, with the nil rate band then moving to £250,000 until the end of September; and the launch of the mortgage guarantee, offering lenders a government guarantee when providing 95% mortgages. 

Sunak also confirmed the extension of the furlough scheme until the end of September, the introduction of new Restart Grants to help businesses reopen — with non-essential retail able to receive grants of up to £6,000 and hospitality and leisure businesses to receive up to £18,000 — and a new Recovery Loan Scheme to take the place of the BBL and CBIL schemes, enabling businesses of any size to apply for loans from £25,000 to £10m through to the end of this year. 

In 2021, the rate of corporation tax, paid on company profits, will increase to 25%. Sunak also announced a Small Profits Rate for small businesses, maintained at 19% for those with profits of £50,000 or less. 

Specialist finance industry responds to the Budget 2021

Tomer Aboody, director at MT Finance, stated that the stamp duty holiday extension would ease the logjam many are facing. 

“The gradual tapering of the return to the £125,000 nil rate band by 1st October should also help avoid the cliff edge that many feared we would have with a sudden cut-off point. 

“With further assistance towards those with a small deposit by backing 95% mortgages, the government will indeed help turn generation rent into generation buy, encouraging would-be purchasers to get on the ladder. The chancellor recognises the importance of the housing market to the wider economy and is doing all he can to support it.

“While higher LTV mortgages will be more readily available with a number of lenders already announcing that they will offer them, it is hoped that buyers don’t get carried away by extending themselves too far. Interest rates may not be rising anytime soon bu,t at some point, they will and mortgage costs will increase accordingly. Buyers must ensure they can afford their mortgage payments when that time comes.”

Guy Harrington, CEO at Glenhawk, said that the government should be applauded for helping not just first time buyers, but current homeowners, and for including older stock in the eligibility criteria. 

“For many Brits, their home is their castle and, for too long, too many have been priced out the market; the more that can experience that feeling of putting the key in the lock for the first time the better. First-time buyers, in particular, for whom this measure will be a game changer, are the roots of the market and nurturing them will only benefit the rest of the housing tree.”

D’mitri Zaprzala, head of residential at Octopus Real Estate, commented: “We have already seen a huge uptick in bridging enquiries with people’s working and living arrangements changing as a result of the Covid-19 pandemic and we expect this to continue as people now try and complete their transactions by June. 

“Given the speed and flexibility of the specialist lending sector, we expect that brokers and borrowers will take advantage of the stamp duty holiday and we will continue to lend where the high street banks won’t.”

Tom Simpson, director of YBS Commercial Mortgages, welcomed the news to extend the stamp duty holiday, which will continue to benefit those with commercial property, as well as residential customers.

“As a sector, commercial lending can play a part in supporting the wider economy so it’s good news for those already waiting to complete on a purchase. Landlords will have more time to benefit from our strong BTL product range with less associated tax costs, and we’re pleased the government has listened to calls for a tapering of the scheme.

“We do, however, think the taper could go further still to give brokers and their clients who have agreed purchases with finance in place, a set period of time to complete their transaction to benefit from the stamp duty holiday and ensure buyers don’t have a repeat of the current situation later in the year.”

Piragash Sivanesan, founder of Totum Finance, noted that the extension of stamp duty was much needed, and takes some pressure off the market, in terms of timing.  

“The £250,000 tapered stamp duty limit to September [will] support the increasing yield-based investment in the North of the UK.” 

He believes the 95% mortgage scheme will have an “interesting impact” on the market. “Regional caps don’t seem to be applied for this scheme, this may make existing homes more attractive than new-build homes; I wonder if this provides a better, more improved re-sale market for property investors flipping properties?”  

Rob Barnard, director of intermediaries at Masthaven, commented on the decision to extend the stamp duty holiday: “The fast-approaching March deadline had created a bottleneck as many buyers rushed to complete purchases, resulting in nail-biting delays. 

“The original purpose of the tax holiday was to stimulate activity in the market, which had been hit hard by a total shutdown and uncertainty at the start of the pandemic. Clearly, the policy has certainly done what it set out to do and the property market has been a key part of the UK’s economic recovery from the shock it received last year. This extension will continue to fuel activity in the market and help compensate for any reduced activity caused by lockdown restrictions or economic uncertainty. 
“The pandemic isn’t over, however, and it’s vital that even post-June, when normal life begins to slowly resume, that the government continues to support borrowers. The fallout of this pandemic will be felt for years to come and after the end of the stamp duty holiday we may begin to see its true effect on the property market. Covid has affected the financial circumstances of almost everyone in the UK, so the government, lenders and mortgage brokers will need to work together to ensure borrowers have access to the financial options that are right for them.”     

Paresh Raja, CEO at MFS, said that the extension of the stamp duty holiday was “exactly what the property market needs”. 

“The appetite among buyers remains strong, and it makes sense for the government to build on this momentum through targeted tax reliefs. The market response will be immediate; I anticipate agencies and lenders will receive another surge of enquiries in the coming 24 hours, and this should lead to a rise in property listings.
“My advice is for buyers and sellers to act sooner rather than later. Three months may seem like a substantial amount of time, but with mortgage providers taking longer to process applications, loan delays could increase the risk of transactions not being completed in time. 

“That is why buyers need to ensure they engage with lenders who can deploy finance quickly, be it a mainstream or alternative finance provider. Failing this, there is a risk of buyers missing out on this new holiday deadline due to factors outside of their control.” 

Matthew Tooth, CCO at LendInvest, commented that the SDLT extension would not only alleviate a lot of the mounting pressure that is currently on lenders, but also conveyancers, intermediaries and other professionals involved in property transactions.

“Since the initial announcement of the stamp duty holiday, the housing market has been booming with a record volume of deals, which has certainly been felt at LendInvest. This extension will provide ample fuel for this to continue, as the country navigates its way out of a pandemic triggered recession.” 

Islay Robinson, CEO at Enness Global Mortgages, said: “95% mortgage products in any shape or form take the market into pretty overheated, dangerous territory, and we’ve previously seen the results of this kind of precarious lending to those who aren’t really in the financial position to commit to it. 

“As always, the devil will be in the detail but many lenders have already tightened their belts over the last few months in terms of their high LTV offerings. Although many big lenders have committed to the government’s announcement today, it will be interesting to see just how many buyers are able to secure such a product when it comes to actually applying.” 

John Goodall, CEO at Landbay, stated that the extension of the stamp duty scheme was good news for landlords and anyone wanting to purchase a property. 

“It will certainly enable all of the purchases currently in the pipeline to get over the line. Longer term, the government really needs to look at reforming stamp duty more broadly as this archaic tax distorts the market.”

Frank Pennal, CEO at Close Brothers’ property finance division, agreed that extending the stamp duty holiday was a “very sensible move”. 

“The property industry has been an engine for economic growth during the pandemic and this decision will enable that momentum to continue.”  

Vikki Jefferies, proposition director at PRIMIS Mortgage Network, added that the new 95% mortgage guarantee scheme will be a lifeline for many aspiring homeowners, particularly those who have been held back during the crisis, and for the biggest lenders who have a desire to support this community but have been constrained during the last 12 months. 

“It’s also encouraging to hear that the stamp duty holiday will now run to the end of September – another promising step for young could-be homeowners. Doing so will go a long way towards encouraging market activity over the coming months, ensuring that both lenders and borrowers have the support they need to progress with cases.

“I am confident that today’s news will be met with great enthusiasm from the lender and adviser community and I am hopeful that, in the months to come, the measures announced will enable a growing number of young borrowers to step onto property ladder and contribute to the ongoing growth of the mortgage market.” 

Paul Stockwell, CCO at Gatehouse Bank, said that an extension to the ‘stamp duty holiday’ was perhaps one of the most expected elements of the Budget. 

“The chancellor had to act to avert the fallout to the property market which would have been caused by thousands of deals falling through due to not being able to complete in time. Yet, moving the deadline to the end of June could simply create another cliff edge, particularly as it is likely the extension will entice even more people to the market this spring in the hope they can benefit from the discount.”

Mark Harris, chief executive at SPF Private Clients, commented: “The 95% mortgage guarantee scheme will create more liquidity in the market. While Help to Buy has been a great help in assisting buyers onto the housing ladder, it has not created liquidity because only new-build homes sold by developers qualified and you could not buy from another homeowner.

“In January 2020, you could get a 95% mortgage for less than 3%, but today you can’t get a 90% LTV deal below that rate. With the number and size of the lenders involved, one would hope that rates become more competitive once more.”

William Scoular, head of private client lending at Investec Real Estate, said that the 95% mortgage guarantee scheme marks a reinvigoration in government thinking. 

“With affordability remaining the key issue, homeownership has failed to keep pace with the maturing and increasingly accessible private rental sector and by including current homeowners and older stock, this intervention has the potential to be transformational for the market.”

John Phillips, national operations director at Just Mortgages and Spicerhaart, stated: “The extension to the furlough scheme is arguably the most important announcement for the housing market. 

“This addition of stability will certainly help lenders, brokers and clients as we head towards normality. The light is beginning to shine at the end of the tunnel and once the country reopens, having an extra few months for the economy to recover will hopefully ensure a strong and quick bounce-back.” 

Andy Davies, managing director at White Oak Leases & Loans, explained that the government-backed schemes have provided Britain’s SMEs with vital support through the coronavirus pandemic and it’s positive to see that support will remain. 

“Non-bank lenders were able to move swiftly at the beginning of the pandemic to adapt to delivering new products like CBILS and it is that ability to be agile and flexible that will be key to the success of the Recovery Loan Scheme.”

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