What The Mini-Budget Means for Mortgages
The former Business Secretary confirmed that stamp duty will no longer be payable on the first £250,000 of any property purchase, a sharp rise on the previous cap of £125,000.
The threshold for first-time buyers has also increased, rising from £300,000 to £425,000, in a move aimed at making homeownership more accessible. The government also hopes that the reforms will free up larger housing stock by making it easier for older people to downsize.
How will the stamp duty reforms impact the market?
According to research from letting agent Benham and Reeves, these measures could save homebuyers up to £1 billion per year, collectively across the market.
This sum is based on the analysis of the sold price data for the 574,091 homes which changed hands over the last year. The agent calculated the amount of stamp duty paid on these purchases and compared it with the amount that would be paid following the Mini-budget to arrive at the £1 billion figure.
Stamp duty reforms have been called for in the past, but critics have warned that a surge in homeownership among first-timers could drive up property prices even further and price many people in this demographic out of the market.
Pete Mugleston, Online Mortgage Advisor’s managing director, said: “The stamp duty reforms will benefit some first-time buyers, a fair number of whom are earning enough to get onto the property ladder, but are wary about owning their own home because of the extra costs involved.
“We’re expecting this announcement to stimulate the market, at least in the short term, but going forward, it’s important that the government takes action to tackle the root cause of surging property prices: demand outstripping supply. They will need to hit their housebuilding target of 300,000 affordable new homes a year to solve our industry’s most burning issue.”
Other measures announced
Also included in Kwarteng’s Mini-Budget was the announcement of a new bill to overhaul planning restrictions and remove some of the red tape around the process. This is potentially good news for developers and self-builders, but full details are yet to be revealed.
Meanwhile, the Chancellor has also reversed predecessor Rishi Sunak’s increases on National Insurance and Corporation Tax, and removed the cap on bankers’ bonuses. It was also confirmed that the basic rate of income tax will be cut to 19p in the pound from April next year, while the 45% higher rate of income tax is being scrapped altogether.
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