My column is a little strange this month as I have started to write it on the eve of the first Labour Budget in many a year — something initially I was looking forward to but which now gives me pangs of dread.

I may be able to edit some of it after the Budget, but I do worry that Labour’s next steps could already have a profound effect on the next election. It must be careful not to hand the Opposition the easiest election campaign phrase of all time: ‘We told you so.’

The government must not continue to bash landlords

Blaming the outgoing government for tax rises only goes so far and, for the many who voted for a change, hoping that it would be a centre-Left one, deviation from that could be fatal. We know there are some fundamental things that need changing but going too far too soon — after all the talk and lessons learned after Truss the Terrible — would be intolerable.

I worry that the very engines of growth in the UK, the SMEs that expand, employ from local communities and look after their staff, will be hung out to dry. Making them feel unappreciated and removing their reasons to enlarge and make money are an enormous backward step.

Implying that they are not “working people”, like the many good landlords who put effort in to look after their properties and tenants, is extraordinary.

Language is powerful and the government could be about to learn, first hand, that the pen is indeed mightier than the sword.

So, I managed to edit this in! Apart from the usual data that reflects a subdued economic outlook, the Budget did deliver a massive £40bn-worth of tax hikes, albeit in areas that did not “technically” breach Labour’s promises.

Over the past week or so there has been a cacophony of conflicting data

Increases to employers’ National Insurance will hurt. A jump in the minimum wage will both help many workers and potentially hurt small businesses at the same time. Capital gains tax will go up, from 10% to 18% for basic-rate taxpayers, and 20% to 24% for those who pay at the higher rate. This will match the existing rates for property, which, importantly, stay the same.

The key headline for the property market was the announcement that the stamp duty surcharge for second homes and landlords would rise by 2 percentage points to 5%, from the very next day! This puts a whole lot of housing chains in potential jeopardy, and we have already heard of some deals stalling. This is a hammer blow to many prospective buy-to-let landlords, but in truth this industry is a robust one. We are likely to see many renegotiations of prices to keep deals alive.

I suspect that, after the initial wailing and gnashing of teeth, the new landscape will settle, although the government needs to be careful not to continue to bash landlords and reduce too far the amount of rental stock. The private rental sector needs to be balanced with both residential and social housing, and it was interesting to see a reduction in the Right to Buy discounts.

We know there are some fundamental things that need changing but going too far too soon would be intolerable

The biggest worry was that this had the potential to be another Truss-style Mini-Budget; but, despite an initial spike in gilt yields, things seemed to have settled. The Office for Budget Responsibility feels that, overall, this Budget will be slightly inflationary and potentially increase interest rates by 0.25%.

There was no mention of the temporary increase to the threshold at which people start paying stamp duty, due to stop at the end of March.

Showing how uncertain things are globally, the price of gold hit a new all-time high last week, rising to over US$2,750 per ounce, fuelled by ongoing tensions in the Middle East, uncertainty ahead of the US election and expectations of further rate cuts from central banks.

Over the past week or so there has been a cacophony of conflicting data that looked, yet again, to indicate that a November Bank of England base-rate cut was back on the cards.

We also saw the European Central Bank cut rates to 3.25%, and its president, Christine Lagarde, mutter something about the Eurozone finally “breaking the neck” of inflation.

I worry that the very engines of growth in the UK, the SMEs that expand, employ from local communities and look after their staff, will be hung out to dry

To summarise, while markets are pricing in a cut to Bank rate of 0.25 percentage points on 7 November, all eyes are focused on market reaction to the Budget.

Meanwhile, the money markets have been doing their usual cha-cha — two steps forward, one step back, then a twirl for good measure — with three-month Sonia sashaying softly down 0.08% to 5.02%, while swaps have… well, I have lost count of what they have done, to be honest. It’s not like the old days!

Since the previous column:

2-year money is up 0.18% at 4.02%?

3-year money is up 0.25% at 3.94%

5-year money is up 0.32% at 3.86%

10-year money is up 0.34% at 3.87%

In the belly of our mortgage market there is, as ever, lots going on.

The issue is that lenders do not quite seem to know what to do, as it is hard to build any secure structure on shifting sand. Hence, we have continued to see some lenders up rates, while others reduce them. In fact, some lenders are putting some rates up and some down at the same time, and pricing meetings must be a barrel of laughs at the moment!

Well done to Mortgage Advice Bureau for being the first intermediary to join the Open Property Data Association

NatWest now requires you to upload all docs straight away and will not underwrite without them all, lapsing the application if not received within 21 days, which seems fair and should mean quicker offers. It has also simplified how it deals with product change requests.

The cuddly Coventry Building Society has improved its residential affordability calculator, and reduced its BTL stress tests, which is welcome.

Barclays, which has also enhanced its affordability model and improved how it calculates the costs associated with BTL mortgages, has made changes to residential maximum ages. The maximum age is now 80, with a maximum retirement age of 75.

Nationwide has enhanced its Green Additional Borrowing, with 0% interest on additional borrowing up to £20,000 for homeowners looking to make energy-efficiency improvements.

We have to be careful that the costs of setting up a file, administering it and paying people don’t make brokers have to shy away from smaller cases

Nottingham Building Society has improved its proposition for foreign nationals on a range of visas, while Suffolk Building Society has made a load of nice tweaks, including new-build flats and blocks up to 10 stories being accepted.

Some do not like me to mention this, but I remain concerned about the number of lenders ‘policing’ broker fees. Now, many do this well and rarely have an issue, but a recent example sent to me summed this up, on a tricky little case for a loan of £40,000.

Many brokers know it is often the smaller cases that cause a disproportionate amount of work and, even if not, it is the same work as required for a loan of £400,000. The broker in question charged a fee of £1,495 and was told by the lender to reduce it to £1,200.

We have to be careful that the costs of setting up a file, administering it and paying people don’t make brokers have to shy away from smaller cases, and clients deviate from advice.

Labour’s next steps could already have a profound effect on the next election

I don’t often single out a firm, but it is worth saying well done to Mortgage Advice Bureau for being the first intermediary to join the Open Property Data Association, as I hope more will follow. It is important that intermediaries are a strong voice in the digitisation and improvement of the homebuying journey to help consumers.

Finally, it was great to see that the Mortgage Industry Mental Health Charter has launched a series of Q&A webinars featuring mental health professionals. The first video aims to improve the wellbeing of professionals in the mortgage sector by highlighting best practice.

Stay smiley, people, and remember there is always someone who will take a call and look out for you. Thank you to those who have been there for me — you know who you are.

Andrew Montlake is a director at Coreco

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This article featured in the November 2024 edition of Mortgage Strategy.

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