Mortgage market update
Stamp Duty Holiday
The recent Stamp Duty Holiday announcement in Rishi Sunak’s Summer Budget has come as a huge positive for all homebuyers, with many people now actively looking for a new property knowing they have a significant up-front saving given this great opportunity.
To put this in context, the average stamp duty saving will be £4,500 according to the Chancellor, with nine out of ten buyers this year now paying no stamp duty at all on purchases. Anyone buying for over £500,000 will automatically save £15,000.
First Time Buyers
The market has seen an extremely positive uplift in enquiries from First Time Buyers in particular.
One of the unfortunate aspects of the ‘New Normal’ lending climate however is that there is currently a reduced amount of higher loan to value options for borrowers with smaller deposits.
There are a range of solutions away from the traditional mortgage so we wanted to bring these to your attention as they may be the difference in you and your loved ones being able to purchase a property.
According to research conducted by L&G, the Bank of Mum and Dad loaned up to £6.3billion across 2019 which would have made them the UK’s 10th largest lender. In most instances this involves a parent or grandparent “gifting” cash to help with a deposit. However not all people are in a financial position to do so, particularly in the current climate.
In the first instance, if family members do not have the funds available but wish to assist then it is worth considering releasing equity from their home. There are a number of lenders who have no maximum age and can lend traditional mortgages in Later Life linked to pension income.
If income is an issue or the clients do not wish to pay mortgage interest every month then Equity Release is an alternative option. This market has evolved considerably in recent years and there is a wealth of excellent rate options with far greater flexibility than ever before.
Please note that where you choose the equity release option, you should remember that Equity released from their home will be secured against it. Your home may be repossessed if you do not keep up repayments.
Mortgages such as the Barclays Springboard Mortgage attracted widespread attention due to the national television campaign, however if other family members can assist with a purchase either by putting savings on account or by allowing a legal charge to be taken against their property, there are a number of lenders with superb products.
This can be an excellent solution for those clients who want to help but are not in a position to gift a higher deposit. There are even lenders who will allow a 100% mortgage to be taken using this type of facility.
Joint Borrower Sole Proprietor
Otherwise known as JBSP, this is a fantastic way of utilising another person’s income in order to increase affordability options. In most circumstances if there are two borrowers in the scenario both will be mortgage borrowers, but only one will be named on the title of the property. This means their income is effectively being used to boost the mortgage amount and therefore increase the choice available when buying a home
In many instances a parent or relative may already own a property, but this enables the lending scenario to utilise their income without incurring the 3% additional Stamp Duty surcharge on Second Homes and avoiding any future tax implications such as Capital Gains.
Help to Buy
One area that we believe remains extremely important in the market is Help to Buy. The Government have backed their flagship scheme to help First Time Buyers and there are some excellent properties available that are part of the scheme.
Borrowers will only need a 5% deposit, although they can put in more, and there is a wealth of products available at competitive rates under the shared equity scheme. It has attracted far less recent press yet was one of the first sectors of the market major lenders came back into after lockdown.
Further information on Stamp Duty
The below SDLT calculator can be used to calculate for specific examples:
As a mortgage is secured against your home or property, it could be repossessed if you do not keep up mortgage repayments.