On the 17th November 2022, the Chancellor Jeremy Hunt, presented his Autumn Statement to Parliament in a bid to restore some stability to the British economy. With the announcement that the UK now joins many other countries in a recession, and much talk of taxes, less was said about the impact on mortgages than in previous announcements. So, what does the Autumn Statement mean for mortgages?
Will house prices rise or fall?
With higher taxes hitting higher earners, the demand for housing may be hit by a decline in disposable incomes. But we know that doesn’t govern why homebuyers decide to move house, or buy a property. There are far more practical reasons that come into play. We could start to see the base rate rise in smaller increments than previously witnessed this year, or indeed, lower. Either of which could have a positive impact for the housing market.
What will happen to interest rates?
Raising interest could prolong a recession, so the announcements made in the Autumn Statement leads us to believe that the Bank of England will have to put a limit on any more drastic interest rate hikes.
Are there any changes to the increased stamp duty threshold?
In September, the then-chancellor Kwasi Kwarteng announced a stamp duty cut for all home buyers as part of the mini-budget.
The new price thresholds, after which stamp duty must be paid, were:
After the first £250,000 for people who have purchased property before (previously £125,000)
After the first £425,000 for first-time buyers (previously £300,000)
For first-time buyers of homes more than £425,000, they will be entitled to 5% relief from that figure up to £625,000 (it was previously up to £500,000)
Considering most of the mini-budget decisions were in fact reversed, the one that remains and unquestioned for now, is that of the increased stamp duty threshold. This will please homebuyers looking to make the most of these savings until 31 March 2025.
As a first-time buyer, you can purchase a property costing up to £425,000 without paying stamp duty. If the home you are buying is more than that, you'll get 5% relief up to £625,000. So, if you are purchasing a home worth - for example - £600,000, you will now pay £8,750 in stamp duty. Before the cut, you would have paid £20,000.
After March 2025, the Chancellor has said he will then ‘sunset the measure’.
While this might seem like enough time before the initiative ends, it takes on average eight years to save enough for a home buying deposit, so we may see more first time buyers looking to the bank of mum and dad to help bolster deposits to purchase before the deadline.
What will happen to mortgage rates?
Rising interest rates have led to increased mortgage rates for those with tracker mortgages, and those who have had to remortgage during the last few months. We’ve become accustomed to low mortgage rates; consequently, mortgage deals have not been as favourable in the current climate.
Until now, The Bank of England has been focussing on bringing down inflation; there wasn't any indication in the Autumn Statement that further hikes were on the way for mortgage rates.
The energy price guarantee will be extended beyond April, which hopefully, will help with the impact of higher inflation for households. Higher earners will also be paying more tax, and possibly spending less. Hopefully, these two things will drive down inflation resulting in less pressure for the Bank of England to raise interest rates further.
Have you got a question we haven’t answered?
Our independent mortgage consultant, Tony, is on hand to help answer any of your mortgage questions. Simply book yourself an online face-to-face mortgage appointment at a time that suits you, or drop Tony a line on info@skylinemortgages.co.uk and get the mortgage clarity you need, before you make your move.
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