UK Government encourages first-time buyers with mortgage guarantee
2021 seems to be a year of opportunities for UK real estate investors. Brexit followed by global pandemic impacted adversely on the investors which directly hit the UK commercial and residential real estate market. To curb the affect, the UK government has been taking practical steps such as it has temporarily abolished stamp duty due on the sales of properties up to £500,000.
This discount poses to be an encouraging step for previously hesitant investors, who came out to buy properties not just in central London but at the outskirts too, thus increasing demand of the UK properties.
Global pandemic impact on realty market
Theoretically, the property prices get affected whenever the economy takes a downturn and the trend was observed during the global financial crunch of 2008. However, it did not happen during this global crisis but unexpectedly, the UK real estate sector performed very well during pandemic and the statistics of the last quarter 2020 indicated that the property prices were at a record high. 2020 concluded at a positive note for UK realty market and the trend seems to continue in 2021 as well.
Help for the first-time buyers
To let this positivity continue, the UK government is set to introduce a mortgage guarantee programme to help first time buyers start their investment journey. The decision was taken after observing a recession-defying surge that the housing market enjoyed during the pandemic. Buyers will be able to obtain mortgage with a deposit of only 5 percent of the value of a property under the plan to turn generation rent into generation buy.
The UK realty experts welcomed this step and hoped to see tens of thousands of new property buyers plunging into UK real estate market, under this mortgage guarantee scheme. The program will bring 95% mortgages back which will help new property buyers having a smaller chunk of deposit. Chancellor Rishi Sunak is expected to officially break this news during the budget due to be announced this week. The upcoming budget will be the first look into a post-pandemic economy after Prime Minister Boris Johnson announced his road-map out of lockdown earlier this month.
Prime Minister Boris Johnson said: “I want generation rent to become generation buy and these 95% mortgage guarantees help to deliver this promise.” “Young people shouldn’t feel excluded from the chance of owning their own home and now it will be easier than ever to get onto the property ladder,” he stated further. The government plans to incentivize the banks to provide mortgages to first time buyers and current home owners to buy properties worth up to £600,000.
Policy makers intend to revive the market
The Treasury revealed that low-deposit mortgages have virtually disappeared due to the adverse economic impacts of the global pandemic. However, the government is all set to take the steering wheel in hands and shrug off the pandemic effects – so it has temporarily obliterated the stamp duty charged on property purchases, which saved buyers up to £15,000. This offer is due to expire at the end of next month but there are news that Rishi Sunak may prolong the exemption to stabilize the market and attract new buyers.
The interested buyers will just need a meagre deposit of 5% to secure a mortgage to buy a house for up to £600,000. The government will offer banks the guarantee, they need when the programme starts in April 2021.
It is a major step by the UK government in understanding the young adults’ finances and their employment prospect, which have been hit hard by the pandemic. That is why, it is also expected that jobs will be major focus of this budget – both protecting the current jobs and creating new in future to help support economic recovery. In this budget, everyone is looking to the UK government to come up with policies to save their jobs and keep a roof on their heads.
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