Higher 'loan to value' mortgages better than a stamp duty 'holiday'?

The end of the stamp duty holiday for first-time buyers on 24 March will have little impact on the housing market compared to the availability of 95% loan to value deals.

The increased availability of 95% deals, which hit a four-year high, is likely to have a far more positive effect on the housing market.

Recent data in fact shows the concession has done little to stimulate the market since the 1% tax for first-time buyers purchasing properties worth between £125,000 and £250,000 was removed two-years ago.

Ultimately what was more of an issue was deposit affordability, so while there may be an uplift in the amount of first-time buyers in the weeks remaining before the deadline, this is more likely to be influenced by the greater number of 95% Loan to Value mortgages currently available.

Now whilst not every first-time borrower would be able to meet the criteria, the increased availability of mortgage finance was more of a factor influencing first-time buyer numbers and as such, the introduction of the government's New Buy scheme could help to sustain the availability of finance for buyers with small deposits.

We’ve not seen the specific details from lenders yet but the proposed mortgage indemnity scheme will guarantee 95% loans up to £500,000 on new-build homes, with developers and taxpayers providing funding and I think it would be fair to say that reducing the size of the deposit needed to buy a property will provide a stronger stimulus for the market.

However we still hope the government will perhaps reconsider the decision to remove the stamp duty holiday – as although the evidence suggests it has done little to stimulate activity – its removal creates unnecessary confusion as some buyers will be trying to complete before the deadline expires and may abandon their purchase if they don’t think they will be able to complete in time which would be nothing more than counter productive to all those involved.

As always , thanks for your attention.

Mark (mark@themortgagemonkey.co.uk)