Key economic factors affecting homebuyers right now

What a week of economic changes!

Within the space of just a few days, confusion has gripped the property market, but changes to stamp duty could be positive for those looking to buy a new home. It is suggested that the mini-Budget was the catalyst for the pound to fall dramatically on the stock market resulting in mortgage lenders withdrawing mortgage products from their portfolios. Yet in Harborne and Quinton the number of properties coming onto the market is increasing, and the there are still no signs that anything is slowing down. If you are thinking of a move, here are the key things affecting homebuyers right now.

Stamp Duty

In the mini-Budget Chancellor Kwasi Kwarteng announced that there would be a permanent stamp duty cut, which raised the stamp duty threshold from £125,000 to £250,000. 

Before this announcement, buyers would not pay tax on the first £125,000, then 2% of the value of a property from £125.001 to £250,00 and then 5% on the portion that fell between £250,001 and £925,000.

Now buyers are exempt from paying stamp duty on properties up to the value of £250,000, but the percentage paid over the remaining proportions remains the same. Buyers will be taxed at 5% of the value of the home from £250,001 to £925,000 and 10% for the portion between £925,001 and £1.5m.

If you are a first-time buyer, the level at which you will have to pay stamp duty rises from £300,000 to £425,000; it is hoped this change will increase home ownership.

Tim Bannister, Rightmove’s housing expert, said while it could lead to some “unseasonal price rises over the next few months”, the permanent change may mean the increase in demand is slower than the temporary cut in 2020. “Plus, buyers could save up to £15,000 during the temporary stamp duty holiday, while the savings are lower with this change.”

Home buying schemes

The housing market over the last couple of years had made it harder for first-time buyers to get into the market, especially when you realise that the average price of a property is up by 15.5% since this time last year.  But there are a small number of home-buying schemes that could help you take that all-important step onto the ladder.

Mortgage Guarantee Scheme

Introduced in the 2021 budget, the mortgage guarantee scheme is also known as the 5% deposit mortgages government scheme. Only available on properties with a purchase price of up to £600,000, buyers can secure a mortgage with a loan-to-value of 95%, as the scheme sees the government backing lenders to offer more mortgages at a small deposit. You need to be looking now, as the deadline for the mortgage guarantee scheme is 31 December this year.

Help to Build

This is the perfect scheme for those looking to build their own home, thanks to an equity loan which the Help to Build scheme offers. The loan offered to you by the government is based on the estimated costs of buying the plot of land and building your home, or doing your own renovation project by buying a previously commercial building and converting it into a home.

You typically need at least 5% deposit, and the loan can be between 5% and 20% of the total estimated project costs.

Two other schemes to look into are Right to Buy and The First Homes Scheme.

Interest Rates

It is predicted that the cost of borrowing to buy a home could rise due to the Bank of England’s recent interest base rate hikes and warnings it could increase these more in the future as a way of tackling inflation. Even if your mortgage is coming to an end, don’t panic! We would strongly advise that you speak to an independent mortgage broker who can look at multiple options to find you the best way forward: many of our clients recommend Meriden Financial Planning. 

This could mean remortgaging early to extend your loan and secure a fixed rate, seeing if your current lender has products you could transfer to, or even switching lenders altogether.  Although you can do this alone, brokers can find deals that you probably won’t, and are able to access rates that may only be available for a short window of time.

Locally

There are always unique trends within the Harborne and Quinton  property market, and therefore, if you are new to the area or looking for a home in a niche location, McHugo Homes are here to help. You can call Andy McHugo on 0121 5170251.