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- The budget had key giveaways for home buyers with an extension of the stamp duty holiday to end of June and a new mortgage guarantee scheme for homeowners.
- If supply remains a constraint, the home prices could rise, given the burgeoning demand because of the stamp duty benefit.
- Share prices of major home builders rose by nearly 6 per cent after the budget announcement.
The Budget announced yesterday on 3 March had boosted the sentiments of the housing market. The ongoing stamp duty holiday has been extended till the end of June, for homes costing up to £500,000 in England and Northern Ireland, bringing cheer to homebuyers. It was introduced in last July and was set to expire on 31 March 2021. The budget move would enable more buyers to take benefit of potential savings, thereby giving an added boost to the UK house prices.
Share price of major homebuilders such as Persimmon plc (LON: PSN), Barratt Developments plc (LON: BDEV) and Taylor Wimpey plc (LON: TW.) increased by close to 6 per cent just after the announcement of Rishi Sunak, Chancellor, UK treasury.
From 1 July, the stamp duty holiday would be applicable to homes priced below £250,000 until 30 September. From 1 October, stamp duty would resume to be applicable on all housing properties valued at more than £125,000.
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Home prices could rise
Market experts say that the extension has given a lifeline to buyers who were trying hard to take benefit of the savings from the stamp duty holiday. Buyers who are already underway with their home sale buy or sell process are likely to derive the maximum benefit of the scheme, add experts.
If the supply of new homes in the coming few remains less than the corresponding value for same period last year, higher demand would translate into home price inflation. The trend is anyways continuing. During February, the house price index from Nationwide grew by 6.9 per cent. It was up from a lower value of 6.4 per cent in January.
Lenders to gain
The budget announced a new mortgage guarantee scheme for people who can raise a 5 per cent deposit while purchasing a home. The government would give a guarantee on 95 per cent loan-to-value mortgages that is expected to support home buyers with small deposits. This will reduce the cost of repayments for borrowers. Lending firms such as Lloyds, Barclays, HSBC and NatWest are expected to benefit from such a move.
The mortgage scheme will be available for new home loans up to end of December 2022. It will help borrowers fix their initial mortgage rate for a minimum period of five years.
The share prices of top three UK homebuilders jumped after Sunak delivered his speech. In fact, shares of Persimmon plc (LON:PSN) closed at a value of GBX 2878 on 3 March, up by 6.2 per cent from the previous day’s close.
Similarly, the stock price of Barratt Developments plc (LON: BDEV) was GBX 732.60, up by 7.07 per cent from the previous day’s closing value. The share of Taylor Wimpey plc (LON: TW.) closed at a value of GBX 175.85 for the same day, up by 5 per cent from the previous day’s close.
The premium FTSE 100 index closed 0.9 per cent higher and housebuilder index was up by 2.8 per cent at the end of the budget day.