Friday, September 28, 2012

Stamp Duty Holiday Is Coming to an End

On 24th March 2012, the Stamp Duty Holiday for First Time Buyers will come to an end.
Properties between £125,000 and £250,000 will now once again face a tax of 1% of the sale price, meaning that First Time Buyers will need to find up to £2,500 more to fund their house purchases than before.
The Stamp Duty Holiday was first introduced back in March 2010 by the then Labour government, which was concerned that figures for property sales had fallen sharply as a result of the recession.
After the financial crisis hit in 2008, mortgage lenders became very cautious and it became much harder for buyers to find the large mortgages of up to 95 or even 100% of the sale price. Practically speaking, this meant that people suddenly needed far larger deposits of around at least 25% of the sale price for lenders to even consider offering a mortgage deal.
Consequently, demand for rental properties has soared in the past few years, with the sales market slowing down whilst people have been up against the challenge of trying to save large deposits, alongside paying monthly rent, in order to try to make a purchase. In these times of pay freezes and high unemployment, the Stamp Duty Holiday has eased the cost of buying a little, at least.
Previously, Stamp Duty had to be paid by everybody, except for first time buyers of a property worth less than £125,000.
The tax is being reintroduced as current Chancellor George Osborne believes that the tax-free period has been largely ineffective in its aim to encourage people to buy.
It isn't all bad news, however. The coalition government is introducing new incentives to buy.
The FirstBuy scheme has already been introduced, which lends people part of their deposit interest-free for up to five years, on new-build homes.
The NewBuy Guarantee scheme, another initiative to be launched next month, will help to make mortgages accessible again, offering potential buyers mortgages of up to 95% on new-build properties. This scheme comes with a built-in insurance for lenders that borrowers will not shoulder the full risk if they default on their mortgage payments; the government will shoulder the liability for up to 5.5% of the purchase price. In simple terms, this means that lenders will see buyers of these new homes as a less risky prospect, allowing more mortgages to be offered. This new scheme will be open to all - first time buyers or not.

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