Mortgage experts in the UK have cautioned first-time home buyers not to rush into acquiring a home just to beat the stamp duty holiday deadline. The stamp duty exemption allows home buyers to avoid a one percent stamp duty if they buy a new property valued under £250,000 (S$495,382) before 24 March 2012.
However, real estate prices are expected to drop by up to five percent this year, and any savings made by beating the deadline may be negated within months by a decline in the value of the property, according to mortgage brokers.
The stamp duty holiday was introduced by Chancellor George Osborne to give priority to first-time home buyers. However, the measure will be removed as it hasn’t been effective.
Lenders’ asking for a big deposit before they approve a mortgage have caused a slump in the housing market. The proportion of annual household income to property values is at a historic high, which means property seekers cannot borrow enough to acquire a mortgage.
Rents are also at record highs, making it more difficult for first-timers to save for a deposit.
Meanwhile, the government will offer an alternative to the stamp duty holiday in the form of the NewBuy Guarantee Scheme, where lenders can offer 95 percent mortgages without incurring all the risks. In addition, borrowers can be lent part of their required deposit without any interest for five years, on the condition that they purchase a newly built residential property that is part of the scheme.
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