Us Personal Loans

In March 2010 the UK government announced a stamp duty concession to make it more affordable to buy your first home. This exemption will end in March 2012.

A concession in the 2010 budget that allowed first time buyers to avoid paying stamp duty on home purchases under £250,000 will end on the 24th of March 2012. Why was this deal established and why is it being scrapped? What difference will this make to people buying their first homes in the future?

This plan was initially established to give a financial boost to people taking out a mortgage for the first time. From March 2010, a first time buyer would not have to pay stamp duty tax when they bought a property as long at its value did not exceed £250,000. At the time, the government anticipated that this would help 9 out of 10 people who qualified, saving them up to £2,500. It was hoped that this would stimulate the housing market as a whole by making it easier for people to join the system.

This concession was always projected to last for two years so it is no surprise that it will end in 2012. Those who may have wished to see it extended, however, were disappointed by governmental analysis that showed that this tax “holiday” has not met its aim. It did not significantly increase the number of first time buyers entering the mortgage market as was originally hoped.

This stamp duty exemption still has some months to go and experts predict that some first time buyers, who can move quickly, will speed up their buying process to take advantage of the saving before the scheme ends. After that date, they will have to pay standard stamp duty rates. This will increase purchase costs.

The government does have plans to help this sector of the housing population. They recently announced, for example, that a new mortgage guarantee scheme will encourage mortgage lenders to give 95% deals to people buying for the first time. This could cut the costs of deposits, making it easier to save for a home, but it could overload some with larger loans.

In the 2011 budget, it also announced a shared equity scheme for new build first homes, FirstBuy. People that qualify for this deal will technically be able to buy a property with a 75% LTV, paying only a 5% deposit. The remainder would given as equity loan funding by the government and the house builder.

Given the importance of first time buyers to the health of the mortgage market and their inability to buy homes at the moment, the industry as a whole will want the government to continue to create incentives that make it easier to buy. How this will pan out exactly in 2012 remains to be seen.

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