Earlier this month, Chancellor of the Exchequer, Rishi Sunak, presented his budget proposal for navigating out of the Covid-19 pandemic, which has resulted in expanded public spending over the last year. His approach is that government spending will remain higher than normal for the next year, until further steps can be taken to reduce government spending as the economy continues to expand.

While the budget addresses a wide range of topics, we decided to concentrate on the property sector, and more specifically, what it means for those looking to invest in property.

Stamp duty holiday extension

In England and Northern Ireland, the Stamp Duty Holiday for homes costing under £500,000 has been extended to June 30, 2021, and then the stamp duty threshold will be reduced to £250,000 until the end of September, with the pre-Covid stamp duty threshold of £125,000 being reintroduced on October 1, 2021.

The main takeaway here is that if you’ve been considering investing in property, the time is now. You are still subject to the 3% second home stamp duty if you purchase a property while already owning one, but with the stamp duty holiday, you will also save a significant amount by purchasing now rather than after September 30th when the threshold returns to pre-Covid levels.

95% LTV Guaranteed mortgages

The chancellor has revealed that the government would guarantee mortgages up to 95%, allowing homeowners who do not have a large deposit to get on the property ladder with just a 5% down payment. Several banks, including Lloyds, Natwest, Santander, Barclays, and HSBC, have now committed to selling these mortgages, with Virgin Money reportedly joining ‘shortly’. Crucially, this is not just limited to first time buyers who have never owned property before, it’s open to everyone.

What has this got to do with property investment?

Since the government has agreed to guarantee these loans, if house values fall, they will lose money in repossession situations, where the value of a home does not cover the cost of the loan taken out to purchase it. This would be disastrous, so it is in their best interests for house values to stay strong, which also instils trust in those who have property investments.

Key points of the Spring 2021 budget

• Extended Stamp Duty holiday from March 31st – June 30th
• The government to underwrite high LTV mortgages to help first time buyers get on the ladder with small deposits
• No increase in income tax
• Furlough extended until the end of September
• No additional alcohol duty, and planned fuel duty hike scrapped
• Universal Credit uplift to continue for 6 months
• No corporation tax increase until April 2023 when it will only affect the top 10% of businesses
• Business rates 100% reduction extended until June
• 5% VAT reduction extended by 6 months