As we are now just a week away to schools starting again, and a mere 112 days until the pubs fully reopen (not that I am counting…), there is very clear light at the end of the tunnel now, and so here we offer some Budget 2021 predictions.
We have what could be a pivotal budget on Wednesday. True to form for this Government, some headlines have crept out to their favoured news outlets already, so this week we have a look at what may be in store with our Budget 2021 predictions.
Stamp Duty Extension?
The Times broke the story last week that the Stamp Duty Holiday deadline will be extended until the end of June.
If this is true it will be greatly welcomed. With the latest lockdown only exacerbating the delays we are seeing in the property world, it seemed unfair to keep the original deadline as many people risked losing out and it jeopardised the whole transaction. A 3 month delay is a sensible timeframe where these people won’t miss out and maybe some others who were not confident they would benefit may also get up to £15,000 off their transaction, which is never a bad thing!
95% Mortgage Guarantee Scheme?
Over the weekend, the BBC reported that we will see a new mortgage guarantee scheme that will drive back 95% lending. While the Stamp Duty scheme will make the headlines, this is actually the real game changer:
Since the onset of Covid, mortgage availability to those with less than a 25% deposit has been much harder than before, and the less the deposit, the greater the issues. If you have just a 5% deposit it is next to impossible to buy a property currently without using a local building society or a more niche scheme.
This is actually a re-emergence of what was called ‘Help To Buy 2’ back in October 2013 as again, 95% lending had all but stopped due to the Credit Crunch. It also has the same mechanics:
• The Government offers a guarantee whereby if a borrower defaults, they cover any losses to the Bank, which in turn, gives the lender confidence to offer 95% mortgages.
It’s a very clever scheme – no messy equity loans, no additional paperwork for borrowers, no extra cash needed at the outset – just a guarantee that future losses will be covered. As arrears rates have remained extremely low through both the Credit Crunch & Covid this should be what lenders need to get them back in this area and it should drive down pricing on all borrowing above 75% of a property value which will be a very welcome thing.
Market Rates continue their upward trajectory. Mainly pushed up by hopes of an economic bounce back in the second half of this year as the vaccine roll out carries on at pace. No sign the Bank of England will raise rates but with upward pressure on pricing for now.
We’ll have to see what the budget holds, but if the new mortgage guarantee scheme comes in as planned that could have quite a big impact on pricing. Currently, if you have 25% + equity/deposit, it may make sense to fix for the longer term, if you have less, best to keep it short term. Lets see how the pricing shakes out, as there is now clear upward pressure on pricing, but yet the Govt trying to push down costs at the smaller deposit area. This is something to keep a very close eye on.
In the last week:
3 Month Sterling Libor = up by 0.003% at 0.062%
2 Year SWAP = up by 0.037% at 0.219%
5 Year SWAP = up by 0.110% to 0.571%
Bank of England Base Rate = Held at 0.10%
2 Year Variable from 1.19%
2 Year Fixed Rates from 1.09%
5 Year Fixed Rates from 1.19%
BTL Rates from 1.19%
The actual rate you will be offered will be dependent on your personal circumstance and deposit level. Please speak to one of our advisers so that they can guide you through this process
Source: Twenty7Tec March 2021
If you would like to talk to us about our Budget 2021 predictions, or more specifically how we can assist you in your own mortgage goals, please do get in contact with one of the team as we would love to help.