What does the budget announcement mean for the housing market?We all know that housing prices, and the entire housing market, was seriously impacted by COVID-19 last year. House prices were, and still are, an important part in our economic growth. This remains a focus for financial experts in the new financial year, and most were on tenterhooks for the announcement of the 2021 budget.So what did the Chancellor, Rishi Sunak announce on 3rd March?There were two main policies announced to help prop up the housing market. The first - to extend the stamp duty holiday, which freezes extra property purchase costs - will remain until June 2021.The second, an introduction of a 5% mortgage scheme, comes into effect in April.But there are still a lot of questions about the impact this will have on the future housing market.Will 95% mortgages help first time buyers and those with low incomes?Yes. 95% mortgages will help first-time buyers, but for those with low incomes, deposits aren't the only obstacles for getting on the property ladder. They could raise enough for the deposit, but still won't earn enough to actually prove to mortgage lenders that they could afford a full term mortgage.This leaves renters stuck in the renting rut; and the introduction of this policy may raise house prices because of increasing demand.How will 5% mortgages work?The Chancellor's plan should help people to buy their first home. The Government will front 5% of a home's cost, leaving the buyers to raise just 5% for a deposit. This policy should allow mortgage lenders to offer mortgages worth 95% of a purchase price, and up to £600,000.Will the extended stamp duty holiday help first time buyers?Sunak's early introduction of the stamp duty holiday last year was well received, and stimulated a boom in the housing market, despite the worsening conditions in the economy due to the pandemic. Removing this extra cost for many first-time buyers allowed for them to get closer to that first step on the ladder.What will this mean for house prices?It's still too early to tell. There are conflicting predictions - while there have been some reports of house prices increasing across the country, housing experts have also stated that prices will depend on where you are buying. City centre properties tend to be more competitively priced than they were before COVID, while suburban areas have seen price rises - leading to some buyers looking to move out of built up, suburban areas.Is the budget announcement good news for the housing market?The 5% mortgage guarantee scheme looks like a great first step to assist the housing market. Because of the two policies, experts are expecting to see a number of properties listed over the coming months, as well as offers placed. Buyers will take advantage of the stamp duty holiday and rush to make offers.As we look forward to a brighter future for the housing market, the sector will play a vital role in rebuilding Britain's economy after the biggest struggle during the pandemic. The first step in the rebuild of the country lies with the government's acknowledgment of housing in the Budget.If you have any questions about the Budget announcements, please contact the team at Butler & Stag.
