All hands on deck to help marooned first time buyers

Published: 16/02/2012

As the First Time Buyer Stamp Duty exemption deadline rapidly approaches, it would appear attention has again turned to help find a solution for this ever-increasing fragile market.

First time buyers are currently exempt from paying the 1 per cent Stamp Duty tax on a property worth up to £250,000. However this initiative is set to come to an end on 24th March. Some experts, including the CML’s Bernard Clarke, are calling for the deadline to be extended:

“With FTB purchases having slumped by almost two-thirds in the last decade, the cost of extending it would be relatively small.

“But it makes a big difference to individual buyers at a time when confidence is fragile. We are concerned that it may result in a decline in first time buyer activity in the spring when we would normally hope to see it pick up.”¹

Others however are not convinced the Stamp Release relief bears much impact on first time buyer activity. As Clarke pointed out purchases have dropped dramatically suggesting the exemption is not enough of a boost.

The main drawback is the level of deposit required especially with rents towering. Following on from its FirstBuy scheme which launched last year, the Government is poised to introduce a new proposal to help tackle the crux of the problem.

The NewBuy Government scheme will allow lenders to offer larger loan-to-value mortgages on new-build homes without taking on all the risk. Should the homeowner fail to repay the loan, if the property falls into negative equity or if it is repossessed, the lender is guaranteed to lose less money than it would do currently as the mortgage indemnity will be funded by developers and the taxpayer.

The Government is not alone in its attempts to tackle the first time buyer equation. Nationwide Building Society recently launched an ISA version of its Save to Buy account. It will allow first time buyers to save for a deposit tax-free.

Available direct through Nationwide branches, the Save to Buy ISA guarantees to pay 2 per cent above the Bank of England base rate and can be opened with just £50. Customers have to pay in a minimum of £50 a month, for at least six months. They then have a maximum of three years to save a total of £10,000 before they can apply for a Nationwide mortgage up to 95 per cent LTV.

Goldsmith Williams is also doing its bit for the First Time Buyer cause. Through our GW 1st Step scheme, first time buyers will benefit from 10 per cent off our standard conveyancing fees as well as receiving a little house warming present of £50 in Marks and Spencer or B&Q vouchers on completion of their case.

¹Mortgage Solutions (Feb 2012)
²Mortgage Solutions (Feb 2012)

Content correct at time of publication