What the Autumn Statement Means for Mortgages and the Housing Market

Now that the delayed Autumn Statement has been delivered, what impact will today’s (17th November) announcements have on the housing market and cost of mortgages? Let’s take a look…

No change to the Bank of England’s remit

Jeremy Hunt has scrapped plans set out by former Prime Minister Liz Truss to reconsider the role of the Bank of England (BoE). The Chancellor, in fact, commented that the BoE is doing an “outstanding job” in tackling inflation.

While this decision will bring much needed stability to markets, inflation – the primary reason for recent interest rate rises – is not expected to come down until the middle of next year. The BoE has already said it will raise interest rates again if needed and it will be interesting to see how they react when they make their next announcement on 15th December.

Tracker mortgages likely to remain popular

Regardless of what the BoE says in the middle of next month, the prospect of inflation being brought under control in 2023 will give homeowners hope that interest rates will follow suit.

In recent months, tracker rate mortgages have once again become popular with buyers and those remortgaging. This is partly due to the more competitive rates offered by trackers right now, but also because of expectations that interest rates will come down during their tie-in period, making repayments more manageable.

Stamp duty cut to be overturned by 2025

One element of Kwasi Kwarteng’s mini budget that will remain is cuts to stamp duty. Mr Kwarteng raised the threshold for stamp duty from £125,000 to £250,000 in September, along with increasing the price at which first-time buyers must pay stamp duty from £300,000 to £425,000.

These tax cuts will remain in place for just over two years until 31st March 2025. Mr Hunt said this is because the Office for Budget Responsibility (OBR) predicts a slowdown in the housing market during that period.

Landlords questioning buy-to-let investments as capital gains tax allowance cut

The statement has seen the capital gains tax threshold halved from £12,300 to £6,000. This will be halved again to £3000 in April 2024.

Dimora Mortgages director, Jamie Lennox said this will raise concerns for some buy-to-let landlords, saying the decision could “be the final nail in the coffin for small buy-to-let owners.”

With rates rising and the value of their assets falling, this could be the case. Although some with a longer-term view may be keen to snap up some bargains if they can find a good deal on a buy-to-let mortgage – particularly as the demand for rental properties is still growing.

Conclusion

Since taking over as Chancellor, Jeremy Hunt has repeatedly warned that tough decisions need to be made. His tenure so far has been one of concern for many, with the cost-of-living crisis being compounded by interest rate rises.

With the prospect of further rate rises – and the estimated peak being around 5% – it’s not just the Treasury that faces tough decisions in the coming months.

But homeowners might find some comfort in the thought that rates could begin to come down more significantly in the latter part of next year. That at least means that the worst of it could be over in a little over six months. And, with some prudent financial planning and continued tightening of belts, this is now looking like a situation that can be ridden out – something that didn’t look so likely for some after the September mini budget.