Chancellor of the Exchequer Rachel Reeves has revealed her first Autumn Budget, and it was packed with measures that will have implications for mortgages and property.
Here we will unpack all of the big announcements and analyse what they mean for mortgage holders, those looking to apply for one in the future, and landlords too.
Hikes for stamp duty and capital gains tax
Among the headline announcements of the first Labour Budget in 14 years were rises to stamp duty and capital gains tax, both of which will impact our business sectors.
Starting tomorrow (31st October), the stamp duty surcharge will increase from 3% to 5%, impacting those with second home and buy-to-let mortgage holders. The Labour Government claims the additional capital will fund an extra 130,000 transactions from first-time buyers and homemovers, but it is likely to prove unpopular with landlords.
Capital gains tax, meanwhile, has risen from 10% to 18%, and its higher rate from 20% to 24%, but the rates you would pay on residential property will remain at 18-24%.
Affordable homes and Right to Buy changes
Reeves, the first female Chancellor in the role’s 800-year history, has also pledged £5 billion to deliver the government’s housing plans, £3 billion of which will be pumped into the Affordable Homes Programme, resulting in the construction of 2,000 new homes.
The Chancellor also reaffirmed Labour’s commitment to “get Britain building again”, part of the party’s manifesto, and will hire hundreds of new planning officers to deliver on this.
Meanwhile, changes to the Right to Buy initiative may prove divisive. The government is reducing the amount of discount offered to those purchasing their council house and allowing local authorities to keep the full receipts from any sale of social housing.
This move is aimed to ensure that local authorities can maximise and retail capital that can then be reinvested into social housing stock, but it means that some council house tenants who are planning to buy their home through the scheme will face a higher bill to do so.
Other measures announced
Also included in the Autumn Budget was the extension of the Inheritance tax threshold freeze for two more years, to 2030. The first £325,000 of any estate can still be inherited tax-free, rising to £500,000 if it includes a residential property passed to direct descendants.
Rounding off the property-themed announcements was an investment of £1 billion to help tackle unsafe cladding and an extra £6.6 billion for the Warm Homes Scheme, which aims to upgrade an estimated 5 million homes to reduce energy bills and tackle fuel poverty.
The mortgage industry reacts
Some of the measures have been met with a lukewarm reception from within the mortgage and wider financial services industry.
Rachel Springall, Finance Expert at Moneyfactscompare.co.uk, described the increase to the stamp duty surcharge as a "blow" to landlords and urged them to see advice if they are buying a new investment property or remortgaging one.
She said: “The buy-to-let market has been dealt another blow now that the stamp duty surcharge on additional homes will increase to 5%. The market has already seen landlords selling up in anticipation of a tax raid, but this change will likely discourage small buy-to-let landlords from investing in property.
"One positive aspect to take away from recent activity in the buy-to-let market has been the downward trend of interest rates, plus there has been a healthy rise in mortgage product availability. However, those landlords facing dwindling profits may now decide this is the final straw.
"Borrowers must seek advice if they need support or indeed to navigate the latest deals if they are due to refinance.”
Ryan Etchells, chief commercial officer at specialist mortgage lender Together, told Mortgage Introducer that the Right to Buy changes could cost some council house buyers tens of thousands of pounds due to the lower discount.
“The Chancellor’s reduction in the discount allowing tenants to buy their council homes under the Right-to-Buy (RTB) scheme will mean they will have to pay, in most cases, tens of thousands of pounds more to be able to get on the housing ladder," he explained.
“The government says this will make the RTB scheme ‘fairer and more sustainable’ but the move seems incredibly unfair, when some people who may have lived in their council homes for years and had planned to make it their own will now be simply locked out of homeownership for good."
Some lenders, including Virgin Money and Principality Building Society, raised their rates in the wake of the Budget, while house price rises cooled.
Are you a landlord or second home owner who is concerned about the stamp duty hike, or perhaps you are worried about the changes to the Right to Buy scheme? Either way, our expert mortgage brokers can help you navigate the changes to the market and would be delighted to offer you a free, no-obligation chat about your plans - get in touch here
