Property Blog: What the Budget really means for homeowners and buyers
In her latest blog, Head of Property Lynne McCaffrey, wades through the detail of this week’s Budget and explains what it really means for those looking to buy a property in the near future.
“So, this week saw the latest appearance of the little red briefcase. But looking beyond all the school boy jeers, I’m interested to understand what impact these announcements will have on a person’s ability to buy a property?
Help to Buy to be extended
“Originally set to end in 2016, the Chancellor confirmed Help to Buy will now run until the end of the decade. However it’s important to note that this relates only to phase one of the scheme. This means aspiring homeowners or movers will only be eligible for the scheme if they are buying a new build property (it’s phase 2 that allows for buyers to purchase older properties).
There’s no doubt Help to Buy has had an impact on the property market. However recent figures suggest nearly two thirds of would-be first time buyers are still unable to save the required deposit – even for a 95% loan-to-value mortgage (LTV) which are increasingly available under the scheme.”
Flood repairs and maintenance boost
“There will be an additional £140m made available for repairs and maintenance to flood defences. While no amount of money can turn back the clock and undo the devastation that so many households are left to deal with, this considerable funding boost is a positive step forward to minimising future damage.
However as weather continues to behave somewhat erratically, flooding will remain an ever-threatening presence. Homebuyers can eliminate this risk by running an environmental search on their property. At Goldsmith Williams, we do this as standard and at no extra cost. Should the search turn anything up, we’ll order a flood risk report. This will not only make you are aware of the flood threat but, as we also supply a copy to your insurer, you can be confident you’ll be able to adequately insure the property before committing to buy.”
“Bob the Builder that is following the announcement that there will be support to build 200,000 new homes. Well I guess this was an obvious one considering the extension of Help to Buy 1. After all there’s no point in extending it if there isn’t any building going on! There remains an issue with supply and demand when it comes to property so this will go some way to ease this imbalance.”
Pension pot tax restriction lifted
“There’s been a lot of talk about annuities in recent months, with rates dropping steadily for many years. Figures have shown that a 65-year-old with a £100,000 pension pot would receive an annuity of £4,920 compared to £11,380 in 1995.
So under the new budget, pensioners will no longer be ‘forced’ to take an annuity but instead can benefit from having all tax restrictions removed, allowing them to withdraw directly from their pension.
My colleague and Head of Equity Release, Richard Espley, is undoubtedly better placed to talk about the potential knock on effect but I believe there is a risk that retirees opting to use their pension as a bank account rather than taking out an annuity could over commit in the early years of retirement and unwittingly leave themselves short further down the line. This could result in an increased reliance on their property and equity release.
Critics split on Stamp Duty reforms
“On one hand there has been praise of the changes to Stamp Duty; homes bought through companies and worth more than £500,000 will now incur a 15% Stamp Duty charge. This is widely regarded as a good move. However there is a great degree of frustration over the failing to fully overhaul the Stamp Duty system.
As previously mentioned, even with the help of Help to Buy there remains real difficulty in raising a deposit. Throw in a substantial tax bill as well as we’re creating a bigger problem.
Of those who are currently saving – just 32% of all wannabe homeowners – only 17% are saving on a regularly basis, putting aside on average £393. It would therefore take them 19 months to have enough for the average 5% deposit of £7792 for a first time buyer. Throw in another £1500 or so in stamp duty and you’re adding a further 4-5 months waiting time. Hardly a step forward.”
Lynne McCaffrey is a licensed conveyancer with over 18 years experience. As Head of Property at Goldsmith Williams Lynne is responsible for the day to day running of the property department, which specialises in conveyancing, remortgage, buy to let and bridging.
Content correct at time of publication