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return to our customer websiteAfter the dust has settled somewhat following the first Budget from the new Chancellor, Nicola Goldie, Head of Strategic Partnerships and Growth at Aldermore looks at how it could impact the mortgage market.
You can’t please all of the people all of the time, and Rachel Reeves’ first Budget as Chancellor certainly didn’t change that script.
We all read the headlines declaring a ‘£40bn tax raid’ and ‘£22bn black hole’, but it’s a good idea with any Budget to sit back and digest the announcements and ensuing reaction, before forming any rash opinions.
A month on from Budget day, the housing and mortgage announcements have been largely forgotten by the mainstream press. However, although the Budget may have seemed ‘mortgage-lite’, the focus on housing will have significant impacts on our sector.
Reeves announced a large range of housing market measures in her Budget, including:
The Budget announcements for housing are obviously welcome, but they need to be seen in the wider context of the new government's key pledges on housing.
It had already promised before 30 October to build 1.5m new homes over this parliament and deliver the biggest increase in social and affordable housebuilding in a generation.
The Budget announcements above are just part of its strategy to move towards those targets. This commitment to change in the housing market is positive, because a more functional housing market is better for mortgage borrowers, lenders and brokers.
The government will engage with the mortgage industry to discuss the continued support of 95% loan-to-value (LTV) lending. This is the proposal to launch a new permanent version of the Mortgage Guarantee Scheme, which is otherwise set to expire next June.
The new version will be called Freedom to Buy and is designed to directly support lenders, not borrowers. It’s good news if it increases competition in the high LTV space, although a more targeted scheme for first-time buyers, similar to Help to Buy, might have been of more direct benefit to help buyers right now.
That’s important because things are set to get tougher, given that stamp duty thresholds are set to come back down at the end of March 2025. This follows the current temporary higher levels, and it was a shame this wasn’t addressed in the Budget.
It will mean the nil-rate threshold for first-time buyers will fall from £425,000 to £300,000, costing them an average of £3,500 extra from 1st April 2025, and much more in some parts of the country, such as London and the South East.
We can’t discuss the Budget without mentioning the implications for landlords.
The second home stamp duty surcharge of 3% was increased to 5%, hitting landlords as well as second homeowners. And it came into effect the day after the Budget speech.
It will make a difference to landlords – £7,000 extra stamp duty on the purchase of a typical home (according to Rightmove).
When combined with the recently announced plan to reintroduce the target of a minimum EPC C-rating on privately rented properties by 2030 and the Renters’ Rights Bill, many landlords may feel disappointed.
One piece of good news for landlords was that the rumoured rise in Capital Gains Tax (CGT) on property disposal never materialised. While the Chancellor did increase CGT from 10% to 18% (lower rate), and from 20% to 24% (higher rate) on other assets, she maintained the rates on residential property sales at 18% and 24%.
Remortgaging demand remains high in the buy to let sector and landlords need broker support more than ever to find a good deal and help them navigate the changing rules and regulations.
While the Budget might not have put housing front and centre, it’s fair to say the government has done exactly that in its first few months in office, with a raft of ambitious commitments and pledges.
A combination of homebuilding targets, planning reform and significant funding for social housing shows a government that understands the importance of housing to all aspects of our lives, communities and work.
And that can only be good for all of us in the mortgage market.