As a mortgage adviser, you need to fully understand the products available to borrowers. These days, part of that is understanding the details of support schemes, such as those offered by the government. This update on government initiatives to support home ownership will help you identify those that are right for your customers.
Stamp Duty Relief
The Stamp Duty ‘holiday’ has applied to the first £500,000 of all house purchases since July 2020 and is due to end on 30 June 2021.
However, rather than immediately reverting to pre-pandemic levels, there will be a stepped change. The threshold will reduce to £250,000 for three months, and then £125,000 from 1 October.
Advisers must also be aware of the impact of individual circumstances on the level of Stamp Duty payable, because this depends on whether:
- someone is a first-time buyer
- they’re purchasing their main residence, or
- they’re buying an additional property.
Help to Buy ISA
Customers who don’t already have a Help to Buy ISA, can’t start to save into one now.
However, a significant number of first-time buyers already have one of these, and they can continue to save into them until 2029.
The government will provide a 25% savings boost of between a minimum of £400 and a maximum of £3,000 – for example if your customer has saved more than £12,000. This can have a significant impact on the deposit which they are able to make.
Shared ownership schemes
Not exclusive to first-time buyers, shared ownership schemes are widely available to those who cannot afford to buy their own home in full. They provide the opportunity to part buy and part rent a home.
As part of the government Affordable Homes Programme for 2021–26, up to 50% of these will be available through a new model, which includes:
- a lower minimum initial stake
- landlord support for essential repairs
- reduced staircasing options – from as little as 1%
- greater influence over the sale of the property.
In addition to the core scheme, there are specific schemes to support the elderly and those with disabilities.
Help to Buy Equity Loans
This scheme enables first-time buyers to borrow up to 20% – 40% in London – of a property’s purchase price from the government, subject to regional limits.
The loan is interest free for the first five years and then interest must be paid until the loan has been repaid. The amount paid back is based on the percentage borrowed and the value of the property at that time. At the time of purchase, borrowers must still contribute a minimum 5% deposit.
For both the shared ownership and Help to Buy Equity Loan schemes, your customer will need to submit applications through a local 'Help to Buy' agent.
Mortgage Guarantee Scheme
Launched in April 2021, the Mortgage Guarantee Scheme aims to increase the availability of 95% mortgages.
It effectively underwrites a proportion of any losses a lender might incur, should a borrower default and the lender can’t recover the loan by selling the property.
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