How the 2014 Budget affects the housing industry

Sarah Morgan is from the Mortgage Advice Bureau, based in Regan and Hallworth
Sarah Morgan is from the Mortgage Advice Bureau, based in Regan and Hallworth

SARAH Morgan from Mortgage Advice Bureau comments on the how the 2014 Budget affects the housing industry and first-time buyers.

While the Budget headlines may have been dominated by changes to the pensions industry and increased allowances for savers, there was still positive news for the housing market. Chancellor George Osborne had revealed, ahead of the Budget, plans to extend the Help to Buy equity loan scheme until the end of the decade. The scheme was previously expected to end in the spring of 2016 but will now run through until 2020.

The equity loan scheme allows borrowers to put down a deposit of as little as 5% with the government providing a loan worth 20% of the property’s value. The remaining 75% is obtained in the traditional way from a mortgage lender. The government loan is also interest-free for the first five years.

While the second phase of the Help to Buy scheme, the mortgage guarantee, has been criticised for simply pushing up house prices, the equity loan scheme stimulates housing supply by being restricted to new homes.

The most recent figures released by government showed that 14,823 properties had been bought using the scheme between its launch and January 2014. The typical house bought was valued at £184,000, less than the average UK property, and has helped boost the construction industry and supply chain.

Since the announcement of the scheme in last year’s Budget, the number of lenders taking part has increased with most major banks and building societies now able to offer products.

Builders have reacted positively to the extension of the scheme as this gives them more security when starting bigger projects that may take years to come to fruition. While not restricted to first-time buyers, the scheme has been largely used by those purchasing their first property.

The scheme has also proved popular because the standard of new build homes has risen in recent years. Many borrowers now favour new homes as they often come with new white goods included and maintenance and support for the first few years.

Osborne also announced plans for a garden city in the Kent town of Ebbsfleet which will see 15,000 new homes built. Other housing developments will also go ahead in the London areas of New Cross and Barking to help boost housing supply.

However, there were no changes to the Stamp Duty Land Tax with borrowers still facing a ‘slab’ structure described as unfair by some in the industry. The only change was for those purchasing a property worth more than £500,000 through a company, with these buyers now being hit with a 15% tax charge under the new rules.

With the other half of the Help to Buy scheme still active until December 2016 buyers of all descriptions now have more options than ever, with a particularly strong outlook for first-time buyers.

Sarah Morgan is from Mortgage Advice Bureau – based in Regan and Hallworth – for further information call Sarah on 01942 526228 or email her at

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