Holiday on stamp duty is break we hoped for
Savills property agency welcomed the stamp duty holiday extension but say the mortgage-guarantee scheme will have a limited impact on the housing market.
Ed Stoyle, head of residential sales at Savills in Yorkshire, says: “The stamp duty holiday extension is the news the housing market hoped for. It will allow record levels of under-offer stock to complete without the pressure of the March 31 deadline and bring badly needed stock to the market.
“The stamp duty saving had most benefited sales in the £400600,000 bracket, so this extension will likely be most keenly felt in the mainstream market.”
Lawrence Bowles, a director in Savills’ research team, analysed the mortgage-guarantee scheme and gave his opinion:
“Guaranteeing mortgages sends a powerful message to the market about Government support for home ownership. It also recognises the importance of the housing market to the economy.
“The guarantee resembles the previous Help to Buy: Mortgage Guarantee. This scheme supported 105,000 transactions from 2013 to 2017, which equates to 28,000 transactions per year.
This is a little over a half (53 per cent) of the 53,000 sales supported by the Help to Buy equity loan at its peak in the year to September 2019.
“But borrowing at high loanto-value ratios is expensive so mortgage terms will be key to its success. The average quoted mortgage rate for a 95 per cent
LTV mortgage was 4.07 per cent in January 2021, according to the Bank of England. Mortgages at 75 per cent LTV cost less than half that – 1.75 per cent.
“Even if a Government guarantee helped bring high loan-to-value mortgage rates down, these loans would still be much more expensive than the 75 per cent mortgages Help to Buy users can access.
“Raising a deposit is not the only barrier first-time buyers face. They also face limits to what they can borrow relative to income.
“Mortgage lenders can only advance up to 15% of their loan book to people borrowing more than 4.5 times their income.
“The minimum income required for a 95 per cent LTV mortgage on the average Help to Buy home in England, £274,000, is £57,844. This is a higher income than 75 per cent of households nationally.
“This suggests take-up for the mortgage guarantee will be greatest where house prices are relatively low and loan-toincome ratios lower. Take-up will be limited in areas where affordability is already stretched.
“Take-up for the previous Help to Buy scheme was greatest in Leeds (1,404 transactions) and Birmingham (1,385).”