What Rishi Sunak’s 2022 Spring Statement Means for Mortgages

Rishi Sunak has delivered his Spring Statement with the UK in the midst of a cost of living crisis. While the mortgage industry was not directly mentioned in the chancellor’s address, the measures he announced are expected to have a knock-on effect on our sector.

Central to Sunak’s announcements was a cut on fuel duty and an increase to the National Insurance threshold, measures designed to curb the cost of living crisis.

If successful, these measures could indirectly benefit mortgage borrowers by helping to tackle spiralling costs for the average household. A higher cost of living usually causes inflation to rise, and in times of high inflation, the Bank of England is more likely to raise its base rate.

When the base rate shoots up, so do mortgage rates, which means it costs mortgage lenders more to borrow money from the central bank, and borrowers also feel the pinch.

It’s good news for the industry that Sunak is taking action to curb the cost of living, but critics claim the chancellor’s measures aren’t enough. Trade Union bosses and MPs from opposing parties are accusing the government of failing the UK’s poorest households.

Nevertheless, figures from the Office for Budget Responsibility (OBR) released in the wake of the Spring Statement suggest that the runaway house price growth we’ve seen of late will begin to slow. They predict that UK property prices will climb to 7.4% this year, but only creep up by 1.3% next year, and 1.5%, 2.5% and 3.1% in subsequent years.

This could be good news for first-time buyers, especially those who are worried about how long it will take them to save for a mortgage deposit while prices are climbing at their current pace, although OBR is also forecasting a decline in saved income for the average household, from 10% last year to 31% in 2023.

Commenting on the Spring Statement measures, Online Mortgage Advisor’s managing director and resident mortgage expert, Pete Mugleston, said: “It’s encouraging that the government is introducing measures to tackle the cost of living crisis, but it remains to be seen whether they will be enough to support those who need them the most.

“In any case, we are optimistic about the immediate future of the mortgage market as the Bank of England remains confident that inflation will return to its target 2% level within the next few years. With inflation forecast to eventually fall, the base rate is unlikely to skyrocket for the foreseeable future and we expect the property market to remain strong.

In other news for the property industry, Sunak also confirmed that homeowners who want to install energy-saving features – such as solar panels and heat pumps – will no longer pay VAT to the government for these materials, news that will be warmly welcomed by landlords.