Rishi Sunak Pours More Fuel On U.K.’s Scorching Housing Rally

(Bloomberg) — Chancellor Rishi Sunak unveiled a fresh wave of support for home buyers across the U.K., adding further fuel to one of the economy’s only bright spots during the pandemic.

The government postponed the deadline for a tax break on home purchases for six months, and set out plans to enable buyers to put down a smaller deposit for their properties.

The temporary level before so-called stamp duty kicks in will remain at 500,000 pounds ($698,000) until the end of June. It will then reduce to 250,000 pounds before returning to its usual level of 125,000 pounds in October.

© Bloomberg U.K.’s stamp duty holiday fueled home buying during lockdown

The tax perk, which was due to end this month and allows buyers to save up to 15 thousand pounds ($21,000), juiced the market during the lockdown that devastated other parts of the economy.

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Mortgage demand soared as buyers rushed to take advantage, and data this week showed annual home-price growth accelerated to almost 7% in February. But the extension merely staves off a cliff edge temporarily, and the market could suffer a setback once it ends.

The three-month extension of the full benefit is likely to mainly benefit the people who are already in the process of buying a home, rather than opening up the possibility of savings to new buyers, said Aneisha Beveridge, head of research at Hamptons International.

“There is fairly limited time for it to make a difference for those not yet in the market,” she said.

Sunak also set out plans for government-backed mortgages under a policy to help prospective home buyers. It will allow purchases of up to 600,000 pounds with only a 5% deposit. Lenders pulled similar low-deposit products from the market last year — only eight were available in January, according to a statement from the Treasury.

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