Archive for category: Buy to Let Mortgages

The recent budget contained some good news for property owners and purchasers.

 

The ‘stamp duty holiday’ for properties in England and Northern Ireland has been extended from its proposed end date of 31^st March to 30^th June 2021. During this time there will be no basic stamp duty on residential property purchases in England and Northern Ireland of up to £500,000 (although the added stamp duty, currently 3%, for second homes and let properties will continue). After 30 June, the starting point for stamp duty will reduce to £250,000 until 30 September, when it will return to its previous level of £125,000.

 

This provides a further opportunity to save costs on property purchases in England and Northern Ireland in the near future.

 

Scotland and Wales have their own equivalent to stamp duty with different rates. No change to the existing arrangements has been announced by the Scottish government so the 31^st March deadline remains if that is where your property is located. But the Welsh government has confirmed that the increase of the Nil band of Land Transaction Tax to £250,000 will continue to 30^th June for properties in Wales.

 

A return to 95% residential mortgages has also been announced in the form of a new Mortgage Guarantee Scheme, with the government incentivising lenders by providing guarantees for loans above 90%.

 

Add to the above the easing of planning reforms already in place or proposed which, for example, enable the building of a two-storey extension to a residential home without the need for planning permission and there are plenty of reasons for property owners and investors to feel confident about the future.

The UK government announced today that it plans to pass legislation giving the right to leaseholders to extend their lease by 990 years at zero ground rent.

This will apply to both leasehold houses and flats and the government estimates it will benefit some 4.5m leaseholders.

Housing secretary Robert Jenrick said: “Across the country people are struggling to realise the dream of owning their own home but find the reality of being a leaseholder far too bureaucratic, burdensome and expensive.

“We want to reinforce the security that home ownership brings by changing forever the way we own homes and end some of the worst practices faced by homeowners.

“These reforms provide fairness for 4.5m leaseholders and chart a course to a new system altogether.”

Under current rules, leaseholders of houses can only extend their lease once for 50 years with a ground rent. This compares to leaseholders of flats who can extend as often as they wish at a zero ‘peppercorn’ ground rent for 90 years.

In a report in July the Law Commission said there was “no reason” for leaseholders’ rights to diverge, and recommended a uniform right to extend a lease for all qualifying leaseholders.

Under the proposed new rules both house and flat leaseholders will be able to extend their lease to a new standard 990 years (meaning effectively a lease need only be extended once) with a ground rent at zero.

Further proposals include ground rents being reduced to zero on all retirement properties and the scrapping of ‘marriage value’ – the supposed value of joining up leasehold with freehold.

Owners of leasehold property will welcome the news, but may have to bide their time as experts warned the changes required to legislation will be complex and may not come to fruition for over a year.

Leasehold tenure is already banned on new build houses, and does not exist at all in Scotland. The Law Commission recommended last year that leasehold should be replaced with commonhold tenure on new homes, whereby ownership and management of land and buildings belongs jointly to the residents of a shared block. Commonhold has been permitted in the UK since 2002 but has often faced legal hurdles – now it is proposed to set up a ‘Commonhold Council’ made up of leaseholder groups, industry and the government, to prepare for a wider take up of commonhold and ‘in due course’ further legislation to implement fully the Law Commission’s recommendations.

On 8th of July 2020 the Chancellor announced a Stamp Duty Land Tax Incentive (a Stamp Duty ‘Holiday’ on the first £500k of the purchase price) on all residential property until 31st of March 2021.

Although, at the time of writing the deadline is still 4 months away we recommend anyone hoping take advantage to act soon and to bear in mind some things may delay a speedy completion of your purchase. ibmco will of course do all it can to expedite mortgage applications and avoid delays from lenders but the below are largely outside our control, hence the advice not to leave your purchase to the last minute:

• Valuations may be slower than normal at present
• Solicitors offices are affected by Coronavirus rules and with many solicitors working from home their service may not be as efficient as normal
• Local land registry searches can hold up the process. There is a big variation in turnaround times depending where your property is. To check current times for your area you can use the following website:

https://www.searchflow.co.uk/news-and-events/local-authority-turnaround-time-increases/

Of course there is also likely to be a ‘log-jam’ of purchases jostling for completion as 31st March 2021 approaches.