Chancellor Rishi Sunak used the Autumn Budget 2021 to invest taxpayer money in long-term plans he says will secure the economic future of the country. Everything from the NHS, schools, local transport and the culture and leisure sector appear set to benefit from the better-than-expected economic outlook from the Office for Budget Responsibility. But immediate changes to improve the finances of households and businesses increasingly worried about rising costs over the next 12 months were thin on the ground. Stealth tax and the Health and Social Care Levy (HSCL) – The previously announced freezing of tax allowances and thresholds for income tax and the introduction of the new HSCL are due to raise very large amounts of revenue over the next five years. These, together with the increase in dividend tax, provide a crucial backdrop to the spending increases and tax changes announced in the Autumn Budget. Capital gains tax change – From 27 October 2021, the deadline for residents to report and pay capital gains tax after selling UK residential property will increase from 30 to 60 days after the completion date. For non-UK residents disposing of property in the UK, this deadline will also increase from 30 to 60 days. Business rates cut – Up to 400,000 retail, hospitality and leisure properties will be eligible for a temporary new £1.7 billion of business rates relief from April 2022. The business rates multiplier will be frozen in 2022/23, which will mean business rates bills will be 3% lower than without the freeze. From 2023, under a new business rates relief no business will face higher business rates bills for 12 months after making qualifying improvements to a property they occupy. National Living Wage increase confirmed – A 6.6% increase to the National Living Wage to £9.50 an hour, starting on 1 April 2022, was confirmed. Young people and apprentices will also see increases in National Minimum Wage rates. Annual Investment Allowance extended – The Annual Investment Allowance will remain at £1 million until 31 March 2023. Alcohol duties reforms – Drinks will be taxed according to their alcohol content, with higher strength products incurring proportionately more duty with a standardised set of bands. Air passenger duty – A new domestic band for air passenger duty for 2023 will be set at £6.50 for flights between airports in England, Scotland, Wales and Northern Ireland (excluding private jets). Universal Credit – While not the U-turn some had hoped for, the taper on Universal Credit, which has meant 63p of every £1 of benefit could end up being lost to claimants, will be cut to 55p by 1 December.

Turning ‘generation rent’ into ‘generation buy’ - 95% mortgage scheme to help first-time buyers

Lenders are now offering a government-backed 95% mortgage scheme to help more first-time buyers onto the property ladder.

The government is hoping to turn ‘generation rent’ into ‘generation buy’ with the help of a 5% mortgage deposit scheme launched on 19 April.

Following the outbreak of the coronavirus pandemic, many lenders withdrew low-deposit mortgages. In just under a year, the number of 95% mortgages available to first-time buyers fell from 391 to just three. It’s hoped the scheme will give lenders the confidence to offer low-deposit mortgages again by taking on some of the risks involved.

 

What is the 5% deposit scheme?

First announced in this year’s Budget, the programme offers first-time buyers or current homeowners the chance to secure a 95% loan-to-value mortgage on homes worth up to £600,000. It’s available on both new-build and existing properties.

The government hopes the scheme will provide an affordable route to home ownership by helping people who may be renting but are unable to save for a deposit.

Buyers will still only be able to borrow in proportion to their income, typically a multiple of 4.5. As a result, the scheme will particularly benefit buyers in lower-value housing markets such as northern England and Scotland.

There are also a number of lenders offering 95% loan to value mortgages without using the government guarantee. With an ever increasing range of options to consider, speak to your financial adviser about the current range of 95% loan to value mortgages.

 

What’s the catch?

There are a few conditions that you’ll have to meet under the scheme. You’ll need to:

  • Buy a property to live in – second homes and buy-to-let properties aren’t eligible.
  • Apply for a repayment (not interest-only) mortgage
  • Pass standard affordability checks, including a loan-to-income test and credit score assessment.

It’s worth considering the fact that the higher proportion of the property price you borrow, the higher the amount of interest you’ll repay on your mortgage. So it might be good to take a step back and figure out if you can save for a little longer and borrow less.

Speak to your financial adviser about how the 5% mortgage deposit scheme could help you get on the property ladder.

 

What does loan to value mean?
Loan to value is the percentage of the property value you’re loaned as a mortgage – in other words, the proportion you're borrowing. For example, if you have a 95% mortgage on a house worth £200,000, you would put down £10,000 (5%) of your own money as a deposit and borrow the rest (£190,000).

 

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

 

Key takeaways

  • The government is hoping to turn ‘generation rent’ into ‘generation buy’ with the help of a 5% mortgage deposit scheme.
  • The programme offers first-time buyers or current homeowners the chance to secure a 95% loan-to-value mortgage on homes worth up to £600,000.
  • Buyers will still only be able to borrow in proportion to their income, typically a multiple of 4.5.

 

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Protect your peace of mind when moving home

Posted by Louise on Friday 18th of June 2021

Moving home can be a hectic and exciting time, but don’t forget about protection – taking out the appropriate policies can save you a lot of stress in the long term.

If you’ve just moved home or are about to, it probably feels like you’ve been caught up in a bit of a whirlwind over the past few months. With searching for a property during a pandemic, making the move before the stamp duty holiday ends and potentially getting caught up in the resulting conveyancing backlog, protection policies are probably not top of your priority list.

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