Brokers expect Budget to address buy-to-let uncertainties
Mortgage brokers expect George Osborne to flesh out how the 3% stamp duty surcharge will work in the Budget announcement next Wednesday.
Currently brokers are uncertain on how the surcharge will affect people buying a new main residence, married couples, consumers based overseas, properties owned in trusts and purchasing homes using bridging loans.
There is also the question of whether the government will allow landlords to circumvent the surcharge by operating through a limited company.
Ray Boulger, senior technical manager of John Charcol, said: “Since the Autumn Statement in November, mortgage lenders and advisers have struggled for clarity and advising clients has been extremely problematic.
“As drafted, the surcharge will unfairly penalise people it appears it was never designed to hit, in particular some people buying a new main residence.
“As the policy intention appears to be not to charge the 3% surcharge when buying a main residence, even if the purchaser(s) owns 100s of other properties, we suggest introducing a simple amendment making it clear that providing the tests for a main residence specified in the consultation document are met the 3% surcharge will not be payable.”
With Osborne backing down on pension tax reforms this week Boulger hoped he will also reflect on the final stamp duty rules to make them “less unfair”.
Matthew Fleming-Duffy, mortgage and finance broker at Cherry Mortgage and Finance, also expected the Budget to shed light on the surcharge. He said: “There seems to be some lack of clarity around how/if the tax would apply to married couples, consumers based overseas including foreign nationals, properties owned in trusts and purchases that need bridging loans.
“On the assumption that the tax change is implemented as per the Autumn Statement I would expect Mr Osborne to provide full details on who will be liable.
“I do believe that the increase in stamp duty is generally well-considered although it will undoubtedly affect many brokers who specialise in buy-to-let mortgages. This will help to temper the housing market and should increase tax receipts for HMRC.”
Rob Ashley-Roche, principal of Rest Assured Mortgages, is worried Osborne might stop landlords avoiding the 3% stamp duty surcharge by going through limited companies.
He said: “It will be interesting to see if Osborne does anything with limited companies.
“With the likes of Paragon heavily advertising limited companies and BM Solutions getting involved you wonder whether the Chancellor is one step ahead.”
Boulger expected Osborne to flesh out information on the Starter Homes Initiative, which has received little coverage since being announced a year ago.
It stipulated that 200,000 first-time buyers will be able to purchase new build flats or houses at a 20% discount.
Boulger added: “Bearing in mind this initiative was first announced a year ago the fact that financing options for purchasers have still not been finalised with mortgage lenders is a damning indictment of the red tape the government appears to have to go through, perhaps because of state aid rules, to agree something which should not be too difficult.
“For the Starter Homes scheme to achieve anything even approaching the government’s target, buyers need as many options as possible, bearing in mind that, as purchases are limited to first-time buyers, a large number of buyers will only have a 5% deposit. Some will prefer a standard mortgage but others will prefer to use the Help to Buy equity share second charge mortgage.
“If the government does not make this option available many buyers are likely to shun the scheme in favour of an alternative new build property where they can use this scheme, which makes a massive different to both the interest rate they pay and monthly costs.”
Lastly with the EU referendum taking place Chris Whitney, head of specialist lending at Enness, predicted Osborne using the Budget as a thinly veiled excuse to warn about the dangers of a Brexit come June 23.