How will the Autumn Statement announcement affect the mortgage market? - Simmonds Mortgage Services

Home / Latest News / How will the Autumn Statement announcement affect the mortgage market?

How will the Autumn Statement announcement affect the mortgage market?

Table of Contents
    Add a header to begin generating the table of contents

    The chancellor, Jeremy Hunt, made a number of announcements during the November 2022 Autumn Statement that will all have a direct impact on homeowners and prospective property buyers, with many of the measures put in place by the previous prime minister and chancellor completely reserved.

    The notable issues likely to impact the housing market were:

    • A 2025 end to the stamp duty cuts introduced by Liz Truss and Kwasi Kwarteng
    • A cut to gains tax exemption threshold in 2023 and again in 2024
    • No replacement of the help to buy scheme
    • An end to the current energy price cap in April 2023 and council tax changes

    Below, we’ll look at how each of these will directly impact the industry:

    End to stamp duty (SDLT) relief in 2025

    The announcement of stamp duty land tax relief is arguably the single positive aspect of the now notorious mini budget on 23rd September 2022. It introduced a significant level of relief for all those buying residential property in England and Northern Ireland, with the threshold for paying SDLT rising from £125,000 to £250,000.

    Even more welcome was the increase to the nil-rate threshold for first-time buyers, which rose from £300,000 to £425,000, as well as an increase in the maximum purchase price that they would be able to claim tax relief from £500,000 to £625,000.

    In the Autumn Statement, however, it was announced that the Stamp Duty Land Tax (Reduction) Bill would be temporary measure, with the cuts now ending on 31st March 2025.

    Whilst this provides many buyers opportunity to take advantage of the current bill, the long term impact on the liquidity of the housing market and wider economic benefits this would have created will now be short lived.

    A major concern is that this deadline will not allow many people currently saving to get onto the property ladder enough time to save deposit. To take advantage of the cuts, their application would have to be in progress by midway through 2024, due to the average length of buying a new home currently being around six months.

    Reduction of the capital gains exemption threshold in 2023 and 2024

    Those clearly impacted by the reduction in the capital gains tax exemption threshold are buy-to-let landlords. At the current time, capital gains tax is payable on the sale of investment properties on any profitable amount over £12,300 annually. However, this exemption will see the threshold on which capital gains tax is payable cut to £6,000 in 2023 and then further to £3,000 in 2024.

    With many buy-to-let landlords already leaving the market due to rising mortgage payments, increasing regulatory requirements and the more general impact of the cost of living impacting maintenance costs and pricing tenants out of their homes, this move may increase the sale of buy-to-let properties. This is expected to disproportionately affect those landlords in the low-mid rental sector, however.

    If you’re a landlord concerned about the rising cost of your mortgage repayments or investing in a new buy-to-let property, we’ll be happy to look at remortgage possibilities with you, as well as key areas of the country that will be less impacted by these changes, and therefore offer continued investment potential.

    Lack of support for first time buyers

    With the ‘Help-to-Buy Scheme’ ending for new applicants in England on 31st October 2022, first-time buyers will have an even greater challenge to get onto the property ladder, particularly with the cost of living crisis making it more difficult to save.

    A deposit for the average home currently takes around five years to save, so those looking to take advantage of the stamp duty relief bill may have to consider a smaller deposit, and face higher interest rates as a result. Of course, this should always be balanced against any losses that would be made by saving for a larger deposit and missing out on the stamp duty relief deadline.

    If you’re a first-time buyer and would like to look at the options available to you, we can help you make the most informed decision about whether to buy now or hold fire until the market has stabilised. This can be a difficult decision and there are lots of factors to consider, however, there are other options, such as family-assist mortgages and the deposit unlock scheme.

    The good news is, there has already been a slow decline in mortgage interest rates, and this is a trend that we expect to see continue in the coming months.

    How the broader cost of living crisis will impact mortgage and house prices

    The cost of living crisis and rising mortgage interest rates pushing up rental costs has already had some impact on the housing market, with slightly fewer houses going to market and first-time buyers reluctant to take the leap due to affordability factors.

    As part of the Autumn statement, the end in the existing energy price cap in April 2023 and local councils being given free reign to raise council tax bills by as much as 5% will only seek to increase the issue, with disposable incomes expected to drop by an average of 7.1% over the next two years.

    The good news for buyers, however, is that the longer term impact of this will lead to a further reduction in the sale of property and therefore lower sale prices. Of course, this is not the best news for sellers, and could also lead to stagnation, whilst current homeowners ‘wait out’ the lull in their housing value.

    Impact on mortgage rates

    The major impact to mortgage interest rates has already been witnessed, and whilst there is still expected to be fluctuation in the coming years, such dramatic rises in interest as the ones seen in 2022, where the Bank of England base rate rose from 0.1% to 3% in under a year, is unlikely to happen again in the near future.

    Prior to the mini-budget announcement that led to the most recent interest rises, the average two-year fixed rate across all loan-to-value brackets was 4.7%, with a very slight difference in the five-year fixed rate, which was 4.75%.

    Today the two-year sits at an average of 6.23% and the five-year st 6.04%, however, this is a fall from their October peak of 6.65% (two-year) and 6.51% (five-year).

    If you’re looking to buy or remortgage in the coming month, you can expect to see a gradual continuation in this fall in rate, however, a return to the mortgage rates seen in 2020-2021 should not be expected.

    Impact on housing costs

    As mentioned above, house prices are expected to fall over the coming years, with the OBR (Office of Budget Responsibility) expecting to see a 9% drop in the average cost of a UK home by the end of 2024. For a 400,000 property, this would see a decrease of £36,000 to £364,000.

    Nick Whitten, JLL’s head of EMEA and UK Living Research forecasting a more immediate fall in UK house prices, with the average value falling by 6% in 2023. This would provide an average discount on current prices of £17,500.

    With this in mind, now could be the time to take advantage of this welcome fall in the cost of buying a home, which will reduce the size of deposit needed and affordability requirements for many prospective buyers.

    Picture of Andrew Simmonds

    Andrew Simmonds

    Andrew Simmonds is the managing director at Simmonds Mortgage Services. He's been providing mortgage advice to home owners for many years.

    About Us
    See our other news articles
    Step-by-step guide to buying your first home

    Buying a house or other property for the first time can be...

    Read More
    Setting up a limited company as a landlord

    If you rent out one or more properties, you’ll need to pay...

    Read More
    Can a buy-to-let be used as an Airbnb?

    The short-let property market has grown substantially in the past decade as...

    Read More

    Google Reviews

    Google Rating
    Based on 315 reviews

    Request a Call-back

    Please complete our website contact form and a mortgage advisor will call you back, or book a meeting with us:
    Scroll to Top