Mortgage Strategy’s Top 10 Stories: 28 Oct to 01 Nov

Mortgage Strategy’s Top 10 Stories of the Week

This week, the Autumn Budget headlines feature significant changes—from reduced Right to Buy discounts to a 5% stamp duty increase on second homes starting October 31. Catch all the details below:

Right to Buy discounts to fall and social rents to rise

In the Autumn Budget 2024, Chancellor Rachel Reeves announced cuts to Right to Buy discounts, allowing local authorities to retain proceeds from home sales to reinvest in social housing. The government will invest £500m to build 5,000 new social homes and consult on raising social rents to provide financial stability for housing providers. Critics, including Together’s Ryan Etchells, argue that these changes could lock long-term tenants out of homeownership, making it harder for them to afford their council homes.

Stamp duty on second homes rise to 5% from tomorrow

Chancellor Rachel Reeves announced an increase in the stamp duty surcharge on second homes and investment properties from 3% to 5%, effective immediately. This change aims to generate revenue and support over 130,000 additional first-time home transactions over the next five years. Critics in the mortgage industry expressed disappointment, noting that rising costs could deter second home buyers and investors. Experts warned that these measures may further strain the private rented sector, which already faces a shortage of available homes.

OBR lifts forecast for mortgage rates and house prices

The Office for Budget Responsibility (OBR) has raised its forecasts for mortgage rates and house prices in its latest Economic and Fiscal Outlook. It predicts average mortgage rates will peak at 4.5% by 2027, up from 3.7% in 2024, influenced by a higher expected Bank Rate. House price growth is anticipated to decline slightly from 1.7% in 2024 to 1.1% in 2025, before averaging 2.5% until 2030. The OBR expects property transactions to increase from 275,000 to 350,000 quarterly over five years, while housing starts may rise from 100,000 to 160,000 by 2029.

Property exempted from Reeves CGT hike

In the recent Budget announcement, Chancellor Reeves confirmed an increase in capital gains tax (CGT), with the lower rate rising from 10% to 18% and the higher rate from 20% to 24%. However, rates for residential property remain unchanged at 18% and 24%. Industry leaders welcomed this decision, fearing that increased CGT would deter landlords from maintaining their portfolios and exacerbate rental shortages. Nonetheless, the impact of a 2% rise in stamp duty on buy-to-let properties may overshadow this relief, creating further challenges for landlords.

Stamp duty to catch 93% of homes if changes go ahead

Research by Leeds Building Society indicates that if current stamp duty thresholds are not extended in the upcoming Budget, 93% of properties for sale in England will be subject to stamp duty. The tax-free threshold for homebuyers is set to revert from £250,000 to £125,000, while first-time buyers will see their threshold drop from £425,000 to £300,000. This change could significantly impact buyers, especially in regions like Yorkshire, where affected properties could rise from 49% to 86%. Leeds emphasizes the need for a comprehensive housing strategy to support affordability and homeownership.

CCTV punch MP takes place on housing committee

Mike Amesbury, the MP under police investigation for a recent altercation, has been appointed to the Housing, Communities and Local Government Committee as an independent member. His appointment follows the Labour Party’s withdrawal of the whip after CCTV footage showed him punching another man during a fight in his Cheshire constituency. The committee’s focus will be scrutinising the government’s aim to build 1.5 million homes over the next five years, as the country has constructed around one million homes in the past five years.

Best rates now on par with those before Truss budget

Research by L&C Mortgages reveals that current mortgage rates have returned to or fallen below levels seen before the September 2022 mini-budget, which triggered a spike in rates. The lowest average two-year fixed rate for homebuyers is now 4.13%, over two percentage points lower than the peak of 6.16% in October 2022. However, rates for buyers with a 10% deposit remain slightly higher, at 5.06% compared to 4.57% in September 2022. Experts note the market has stabilised, providing borrowers with greater certainty.

Landlords do not fall under ‘working people’ Budget tax shield: PM

Prime Minister Keir Starmer has raised concerns for landlords by stating they do not qualify as “working people,” which may foreshadow tax increases in the upcoming Budget. While the government pledges to shield working individuals from tax hikes, the definition excludes those who earn income from assets. The National Residential Landlords Association argues that many landlords are employed or self-employed and rely on rental income. Proposed tax changes could further strain landlords, who already face significant costs for property upgrades and regulatory challenges in a tight rental market.

Govt gives no indication on stamp duty extension for FTBs

In the recent Budget announcement, the Chancellor confirmed there would be no extension of the first-time buyer (FTB) stamp duty threshold, set to revert from £425,000 to £300,000 in March. While existing homebuyers face increased stamp duty from £250,000 to £125,000, FTBs are still exempt under the higher threshold. The decision has drawn criticism, with industry experts warning it could hinder homebuying activity and exacerbate housing market instability. Concerns were raised about potential transaction delays as buyers rush to complete purchases before the March deadline.

Goldman Sachs upgrades Bank rate forecast to hit 2.75% by November 2025

Goldman Sachs has upgraded its forecast for the Bank of England’s base rate, predicting it will reach 2.75% by November 2025, down from an earlier estimate of 3%. This shift is based on falling inflation, which dropped to 1.7% in September, and expectations of a series of rate cuts. Money markets indicate a high probability of a rate reduction from 5% to 4.75% at the Bank’s next meeting on 7 November. Goldman analysts believe UK economic conditions support a longer-term downward trend in interest rates.

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