New 95% Mortgage Scheme Launches

The new government-backed 95% mortgage scheme launched on 19 April 2021.  High street lenders including Lloyds, Santander, Barclays, HSBC, and NatWest have all signed up to the scheme.  OGR Stock Denton’s residential conveyancing team are highly respected panel members on all four aforementioned lenders.

With studies showing that 80% of renters are now actively saving for a deposit, the ability to borrow up to 95% of the value on a property will ensure more people realise their dream of owning their own home.

How does the 95% mortgage scheme work?

With rents rising every year, the challenge to getting a foot on the property ladder is saving the necessary deposit.  During the Coronavirus pandemic, 95% mortgages virtually disappeared, putting a further barrier between Generation Rent and their desire for homeownership.  At the most recent Conservative Party Conference Boris Johnson made a promise to tackle inequality in the housing market.  By providing a government-backed low deposit scheme for properties purchased for £600,000 or less, thousands more will be collecting keys from an estate agent between April and when the scheme closes in December 2021.

Susan Allen, CEO of Retail and Business Banking at Santander gave her backing to the scheme, stating:

“We know that raising a large deposit can often be challenging for potential home buyers, so we’re pleased to be part of the government’s Mortgage Guarantee Scheme offering a range of 95% mortgages to help both first-time buyers and home movers.

As one of the UK’s largest mortgage lenders we see how important homeownership is to our customers and we use our wide experience and expertise to support them throughout the home buying process.”

How OGR Stock Denton’s Conveyancing Lawyers can help you with the 95% government-backed mortgage scheme

 With years of experience in the residential property market, our Residential Conveyancing Solicitors will ensure your 95% mortgage application and property purchase transaction goes through smoothly.  You can be confident that we will apply for all the necessary property searches and carefully examine the title and explain any issues that may affect your future enjoyment of the property.  As a full-service law firm, we can also assist you with other legal issues relating to your new home, for example drafting a Will or a Pre or Post-Nuptial Agreement.

Reacting to the news that the 95% mortgage lending scheme has been launched, Michael Stock, who heads up our Property Department comments:

“The Government’s Mortgage Guarantee Scheme will provide the boost many prospective home-buyers need to get on the property ladder.  However, no property acquisition is without risk.  It is essential to have an experienced Conveyancing Solicitor examine the mortgage offer and the details of the property to ensure the risk of falling into negative equity is mitigated.  Most of our clients and their families remain with us long-term because they appreciate that we take the time to get to know them and trust that they will be swiftly notified regarding any concerns around their property purchases.”

Whether you are buying a pre-existing home or a new build, our North London based Property Lawyers will provide expert advice and ensure your interests are fully protected.

To make an appointment to discuss any aspect of residential property law please email or phone 020 8349 0321.

 

What The 2021 Budget Means For Homebuyers, Employers, and Investors?

On 3 March 2021, Chancellor Rishi Sunak delivered this year’s budget. A year ago, two weeks before the first Coronavirus lockdown, the Conservative Party was promising to spend enormous sums in order to ‘level up’ and reward the so called ‘red-wall’ voters. Then everything changed almost overnight, and most of the money set aside for infrastructure spending etc was diverted into saving the economy, people’s jobs, and the NHS. This year’s budget was about continuing to provide Coronavirus support and paying for the mountain of debt accrued in fighting the pandemic. However, given the circumstances the country (and the world) are in, there was some surprisingly good news from the Treasury.

Residential Property Solicitors in London can help more people buy their home

Those looking to purchase a home have been given a double-shot of good news. Not only is the Stamp Duty Land Tax (SDLT) holiday being extended to the end of June, first home buyers are also set to benefit from a government-backed low deposit mortgage scheme.

Stamp Duty Land Tax

Introduced in July 2020 to help the residential property market recover after it came to a virtual standstill in the first lockdown, the SDLT raised the tax-free threshold to £500,000. This meant most homebuyers have not had to pay SDLT when buying a new home, saving them thousands of pounds. There was concern that the property market would fall off a cliff-edge if the tax break was abruptly ended on 31 March, as many transactions would not have completed, leading to buyers pulling out of sales as they would not be able to afford to pay SDLT. Thankfully, the Chancellor announced that the tax-free threshold would remain until 30 June 2021. From 30 June to the end of September 2021, the nil rate band will be set at £250,000 – double its standard level.

Low-deposit mortgages

Low-deposit mortgages have essentially disappeared over the last 12 months (although the number of lenders offering them has been declining since the 2008 financial crisis). This has made it almost impossible for first-time buyers, especially in London and the South-East, to save enough for a minimum 10% deposit. The government has said it is determined to turn ‘generation rent’ into ‘generation buy’.

To help all home buyers (not just those trying to get on the property ladder), the Chancellor confirmed that:

“several of the country’s largest lenders including Lloyds, Natwest, Santander, Barclays, and HSBC will be offering these 95% mortgages from next month.”  

Buyers will pay just 5% deposits to buy homes worth up to £600,000. The government will offer lenders a guarantee to provide mortgages covering the remaining 95%.

Businesses can continue to benefit from the Furlough Scheme

For both employers and employees, the Budget announcement that the Government’s Job Retention Scheme is being extended until September will be welcome. 

Speaking in the Commons, Mr Sunak said:

“As businesses reopen, we’ll ask them to contribute alongside the taxpayer to the cost of paying their employees. Nothing will change until July when we will ask for a small contribution of just 10% and 20% in August and September.”

Mr Sunak told the Commons: “As businesses reopen, we’ll ask them to contribute alongside the taxpayer to the cost of paying their employees. Nothing will change until July when we will ask for a small contribution of just 10% and 20% in August and September.”

Despite this positive news, there is likely to be redundancies when the Furlough Scheme does come to an end. For employees, this may mean seeking employment law advice on Settlement Agreements and whether they have a claim for unfair dismissal. Employers may need to see an employment lawyer for advice on ensuring the strict statutory redundancy process is correctly followed.

Inheritance Tax Solicitors can advise on the best estate planning strategies

For some, the budget did not bring good news. Although the Chancellor did not raise Income Tax, National Insurance, or VAT, a freeze was put on Inheritance Tax, pension ‘lifetime allowances’, and the personal tax allowance thresholds. As wages and the value of assets increase over the next few years, more people will be subject to increased taxes.

To protect your wealth, tax planning is essential. An Estate and Inheritance Tax Planning Solicitor will carefully evaluate your investments and advise on actions to take to avoid paying more tax than is necessary. Because the government’s need to repay the deficit will become more pressing over the coming years, it is vital to get your tax planning in order immediately.

To make an appointment to discuss any aspect of residential property, employment, or tax planning law please send us an email or phone 020 83490321.

UK Stamp Duty Holiday set to be extended?

It has been widely reported that the Chancellor of the Exchequer, Rishi Sunak is likely to extend the Stamp Duty Land Tax (SDLT) holiday for a further three months.  This will occur when he presents his budget on 3rd March 2021.

With the looming threat of over 200,000 current residential property transactions collapsing when the SDLT holiday ends on 31 March 2021, estate agents, solicitors, mortgage lenders, as well as buyers and sellers welcome the news of a possible extension.

Residential property solicitors in London are urging people not to make any financial commitments on the back of the reports that the SDLT holiday will be extended.  One thing that the Coronavirus pandemic has taught us is that government promises and policies can swiftly change.

In this article, we explain what stamp duty is and why not extending the holiday poses a serious risk to the property market.

What is Stamp Duty?

If you buy land above a certain price threshold in England or Northern Ireland, either freehold or leasehold, you may have to pay SDLT.  Scotland and Wales have different but equivalent taxes.

What is the Stamp Duty holiday?

During the first lockdown in March 2020, the residential property market virtually ground to a halt.  To help it recover, Rishi Sunak introduced a SDLT holiday, waiving the tax on the first £500,000 of the property price. 

SDLT over the first £500,000 is calculated as follows:

Property Value Stamp Duty Rate
£500,001 to £925,000 5%
£925,001 to £1.5 million 10%
above £1.5 million 12%

The above applies to people who are purchasing a property that will be their only home.

If you are purchasing an additional home, the SDLT rates up until 31 March 2021 are as follows:

Property Value Stamp Duty Rate
Up to £500,000 Up to 3%
£500,001 to £925,000 8%
£925,001 to £1.5 million 13%
above £1.5 million 15%

 

Why are residential property lawyers and estate agents so concerned about the end of the SDLT holiday?

There is pressure on the Treasury to extend the SDLT holiday in some form to avoid a ‘cliff-edge’ situation of thousands of house sales falling through because buyers cannot afford to pay normal stamp duty.

The time for a sale and purchase transaction to complete has become significantly longer due to the sheer number of house purchases and the fact that many organisations and businesses involved in real estate transactions have had staff off either sick or self-isolating.

Obtaining property searches is one of the main reasons for delays.  In December 2020, around 8% of local authorities were reporting significant delays in returning searches with turnaround times for all of these local authorities exceeding 26 working days.

There have also been major delays in processing mortgage applications.

A stable property market is essential to the UK economy.  Residential property represents the largest proportion of most people’s consumer wealth.  The Bank of England puts it succinctly:

“The housing market is closely linked to consumer spending. When house prices go up, homeowners become better off and feel more confident. Some people will borrow more against the value of their home, either to spend on goods and services, renovate their house, supplement their pension, or pay off other debt.

When house prices go down, homeowners risk that their house will be worth less than their outstanding mortgage.  People are therefore more likely to cut down on spending and hold off from making personal investments.”

Will the stamp duty holiday be extended?

The government has given no assurances that the SDLT holiday will be extended.  And even if it is, it may not continue in its current form, as doing so would merely ‘kick the can down the road’, leaving the property market vulnerable to another ‘cliff-edge’ in June.

To mitigate the risk of the property market plummeting, the Treasury may extend the holiday only to those who have reached a certain stage in their residential property transaction, for example, agreeing with solicitors to exchange contracts.  Alternatively, the tax relief available may be tapered down between March and June.

Either of the above scenarios will result in transactions becoming more complicated, and therefore, the Chancellor may decide on a blanket extension to the existing relief, taking a chance that the vaccine programme and easing of lockdown will boost confidence enough to ensure the market stays buoyant throughout the summer.

We will update you as soon as a decision is made. In the meantime, if you are concerned about your current house sale or purchase or want advice on how to take advantage of the SDLT holiday, please get in touch with a member of our conveyancing team today.

To make an appointment to discuss any aspect of residential property law please email or call us on 020 8349 0321.

Webinar – Covid and divorce, 12 months on…

OGR Stock Denton LLP would like to invite you to join our live webinar – Covid and divorce, 12 months on…

4.30pm, Thursday 11th March 2021

Zoom webinars

Join our live interactive discussion, where our experts reflect on the past 12 months and consider the issues for family lawyers as we come out of the second UK lockdown.

Topics covered in this webinar include:

  • What are new clients reporting in terms of separation and divorce due to lockdown issues
  • Reported case law during COVID-19
  • What will never be the same for divorce lawyers again post lockdown
  • What could improve when we are out of lockdown
  • Professional practice points and the future outlook for divorce lawyers

Hosted by Graeme Fraser, Partner and Head of Family team at OGR Stock Denton LLP, and guest speaker Max Lewis, Barrister and Arbitrator at 29 Bedford Row Chambers.

If you would like to join this webinar, please email Ali Kabani:

akabani@ogrstockdenton.com

 020 8349 5514

Bank of Mum and Dad – Top three things to consider

The plight of young people trying to get on the housing ladder is well known. The days of being able to borrow 100% of the property price disappeared in the fog of the 2008/9 financial crisis.  Furthermore, the cost of housing has risen dramatically, increasing by 1,145% since 1980 and predicted to rise a further 17% over the next decade. London residential property solicitors are seeing more young people funding first home purchases through the ‘Bank of Mum and Dad’. 

But before handing over a significant sum to your children so they can purchase a property there are several things to consider to prevent a bitter family dispute developing in the future. For example, your son or daughter may be buying a property with their cohabiting partner. If their relationship ends, you may find it difficult to recoup your money if the loan and property purchase has not been structured to protect your interests as a lender.

The top three things to consider when lending or borrowing from the ‘Bank of Mum and Dad’ are:

Ask your property Solicitor to structure the loan to ensure you are repaid

If you have decided to lend rather than gift house deposit money, your residential conveyancing Solicitor will advise that you draw up a loan agreement detailing how the loan is to be repaid. You can also put a legal charge over the property in the same way a bank would if it were providing a mortgage. This will give you the power to sell the property (as a last resort) if your son or daughter and their partner do not repay you, provided there is sufficient equity in the property at the time of sale.

You may also choose to have your name registered on the property’s title, which would give you more control.  You and your child and their partner/spouse can purchase the property as tenants in common, with you holding a proportionate share of the property related to the size of the loan.  For example, as tenants in common, your son or daughter could hold 40% of the property, their partner 40% and you 20%.

If you are gifting the deposit money, make sure you understand the tax implications

You may choose to gift your children money for house deposits with no expectation of repayment. Whilst this is a wonderful gesture, it can have significant consequences in terms of tax. Inheritance Tax is payable if your estate is worth £325,000 after your death. Married couples can ‘inherit’ each other’s tax-free allowance, raising the amount to £650,000.  And if you leave your family home to your direct descendants, you can benefit from the Residence Nil Rate Tax Band of £175,000. 

You can give away £3,000 per year tax-free.  However, given that the average bank of mum and dad loan/gift is £24,100, rising to £31,000 in London, it is crucial to invest in estate/tax planning advice so you can gift house deposit money without incurring Inheritance Tax at a later date. Our private client team can work closely with your accountant to also plan for second-home Capital Gains Tax if you choose to own part of your child’s property as a tenant in common.

Have your property law Solicitor explain the legal implications of being a guarantor or taking out a joint mortgage

If you do not have the money available to gift or loan part or all of your children’s house deposits, you could consider being a guarantor on their mortgage.  Although fewer banks allow for guarantors these days, a mortgage broker will undoubtedly be able to find a willing lender. If you choose to be a guarantor, you must have the lending agreement checked by an experienced Conveyancing lawyer and ensure they fully explain the small print relating to your obligations to repay the mortgage if your child defaults on their mortgage payments.

You can also take out a joint mortgage with your child and their spouse/partner.  This will result in you owning part of the property.  Some banks will insist that you are aged under 70 at the end of the mortgage term and others will only provide a joint mortgage for interest-only loans.

Want to know more?  Come to our live webinar on How Secure Is The Bank Of Mum And Dad?

The above is simply a brief overview of the legal considerations and implications of the ‘Bank of Mum and Dad’. There are many other considerations such as whether or not a lending parent may have an interest in the property under trust law, Consumer Credit Act issues should the relationship between the parents and their child or their child’s partner break down, and allegations of undue influence in the case of a future dispute developing.

On Tuesday, 2nd March 2021, London-based property Solicitors from OGR Stock Denton LLP will be presenting a live webinar discussing all these matters and more. For further information please visit our events page.

Webinar – How secure is the Bank of Mum and Dad?

OGR Stock Denton LLP would like to invite you to join our live webinar – How secure is the Bank of Mum and Dad?

1.00pm, Tuesday 2nd March 2021

Zoom webinars

With the introduction of the Stamp Duty Land Tax (SDLT) holiday in England & Wales there has been a surge of applicants borrowing money from their parents to purchase either their first and second home

This webinar will look at the legal and tax implications of parents lending money to their children to purchase a home, particularly where spouses and cohabitees are involved, including some recent case examples of how we helped clients in similar situations.

If you would like to join this webinar, please email Ali Kabani:

akabani@ogrstockdenton.com

 020 8349 5514

Stamp Duty exemption for UK home buyers

The COVID-19 pandemic has turned many industries upside down by virtually shutting off their customer base, and the Government has resorted to a variety of extreme measures in order to limit the damage that the businesses in these industries suffer. Of all these measures, one of the biggest is the Stamp Duty holiday, which could exempt home buyers from tens of thousands of pounds in costs. So how does the holiday work, who does it affect, and how can we help? Let’s take a look.

What is the Stamp Duty holiday?

Chancellor Rishi Sunak implemented the Stamp Duty holiday to revive the flagging housing market, as the residential property market clamped up in response to the economic situation. The measures mean that Stamp Duty only has to be paid on properties worth more than £500,000, rather than the £300,000 limit under the old rules. This measure actually doesn’t mean much for first time home buyers, because the average new house only costs £208,000, but to professional landlords and investors, it can mean a huge boost to their profits.

What are the potential savings?

For property dealers who regularly transact in homes worth more than £500,000 the old SDLT regime would have seen them pay in excess of £30,000 in Stamp Duty alone, paying 3% on the first £125,000, 5% on the next £125,000 and 8% on the last £250,000. Now, as a result of these changes they will only pay the minimum rate of 3% on the sale, so a £500,000 property will only cost them £15,000 in tax. Clearly it’s well worth considering investing during this holiday, which ends in March 2021, due to the level of potential savings.

How can we help?

If you’re an existing landlord or investor hoping to capitalise on the holiday, or you’re a new starter looking to dip your toes in the water, it pays to get expert advice in these unprecedented times. While this is a potentially golden opportunity to make a life-changing investment, the difficult economy also makes it a serious risk, and to go about it without the best help could have serious consequences. Thanks to our years of conveyancing experience, and our down to earth and no-nonsense advice, we can help you make the best investment with your money and to ensure you make the most out of the SDLT holiday. If you’ve got your eye on a property, and you’d like to make your move during this time, get in touch with us on (0)20 8349 5501.