This is the second of our blogs looking at the way the budget and other general trends could affect the housing market. It is probably fair to say that the budget shook the housing and property market more than a little bit this year. People are asking if this is a good time to buy, wondering what will happen once the current stamp duty holiday stops, and if they qualify for the new 5% deposit scheme, and many other questions.
So, this month we thought it would be a good idea to be really practical and look at ways you could take advantage of the current trends. As we always say, property still represents one of the best options for long-term investment, so it is important to make the right choices.
Please remember though that the comments and advice we give in these articles are general opinions, you should call us about your personal circumstances before making any financial decisions.
1. The new 5% deposit scheme and low-interest rates will open up more properties to more buyers.
If you qualify for a 95% mortgage, then you should find that more options open up to you. The difference in the deposit required for a buyer will be particularly useful to first-time buyers who are struggling to get on the property ladder and those who have a good income but low savings or not much equity in their current home. Lower deposits will need to still be balanced against the payments and long-term potential for the property though, so It’s really important that you speak to us about your potential mortgage options. Taking all things in balance though, if taking advantage of the 5% deposit is right for you, then you may regret not doing so if it changes in the future.
2. The government will cover some of the mortgage risks, so mortgage lenders will be encouraged to offer loans.
People seem to be a little bit confused about this one sometimes. The government will guarantee some of the risks for the lender. From the point of view of someone applying for the mortgage though, it will be exactly the same process and payments. There is sometimes a belief that the government will pay this outright or that payments will be lower, and this isn’t the case. Basically, the government will offer to guarantee a percentage of the losses for part of the mortgage should there be a problem. This reduces the potential for loss for the lender and therefore means they should be encouraged to make the loan in the first place.
3. Stamp duty changes will continue to keep the market moving.
This may well be another area that is particularly good for those moving up the property ladder. The current extension to stamp duty holiday (i.e., for properties up to £500,000) ends in June except for houses under £250,000 where it is available until the end of September. So, if you have a property in this category, now is a great time to sell. With the 5% scheme making the initial deposit more affordable to new buyers, it seems like a win-win for the seller and buyer. Again, you probably should start to look now if you are thinking about it. There is a clear time limit on this one.
4. The rules about credit history and unstable income could become a little more flexible.
Bad credit and variable income have always been the bugbear of mortgage hunters. In fairness to them, you can understand why mortgage providers see the numbers on the application and get nervous about approving it. However, from the applicant’s point of view, it can feel unfair to be judged on something that happened years ago, or a variable income that you know is just as reliable overall as a steady wage. After a year of constant change in income, furloughs, and ups and downs, it seems likely that if you shop around a little, you may find a more flexible lender. Coupled with the guarantee on potential losses, it could really bode well for people who would normally struggle with mortgage availability. This is really an area where you need to speak to us in some detail because you will need the right advice, but things do seem a little brighter for this group of applicants.
5. Location could be a big factor.
This is probably one of the most underestimated changes for 2021. With so many businesses now switching to a work from home policy for at least part of the week, the need to be near the workplace has reduced for many people. That means the traditionally lower-cost areas outside the commuter zones could see a boom in sales. Looking further afield could really pay off at the moment if you are not tied to the commute.
With everything that is happening, 2021 is looking like a very viable time to be moving home or investing in property. We are here to help you navigate through the mortgage market and find the deals that work best for you.
Your home may be repossessed if you do not keep up repayments on your mortgage.
Any information about insurance contained in this article is only an opinion of the author and not intended to offer insurance advice. For bespoke advice about insurance please contact us.