What the Budget means for the housing market

housing markets
Despite a global pandemic in the background, the news coming out of the Budget was overwhelmingly positive with the Office for Budget Responsibility forecasting the fastest growth for the economy in almost 50 years. Unlike in previous Budgets, there were not many announcements affecting the housing markets. The Chancellor of the Exchequer must feel that the market is working quite effectively without his interference as he mostly left well alone.

There was £24 billion of investment announced for housing markets and housing-related activity, much of which had been trailed before. The £5bn cladding fund aimed to remove unsafe cladding from the highest-risk buildings is welcome but time will tell whether it is enough to ensure homeowners don’t become prisoners in their own homes, unable to move. This will be paid for by a residential property developer tax on housebuilders with profits in excess of £25m at a rate of 4 per cent over this threshold.

The Chancellor mentioned inflation, which is expected to average 4 per cent next year, well above the Bank of England’s 2 per cent target. This has been blamed on the global demand for goods and energy but Rishi Sunak said he had written to the Bank reminding it that it is in its remit to keep inflation in check.

What does this mean for borrowers? It could mean that interest rates will rise at the Bank’s next meeting on 4 November. Indeed, the money markets have already factored a rise in and some lenders have started raising their cheapest mortgage rates accordingly so even if interest rates don’t rise, mortgages will cost more.

Those looking for a home loan may therefore want to move sooner rather than later to get hold of a good deal. It is important not to panic as we are talking about rates increasing from an extremely low level, with base rate at 0.1 per cent since March 2020. But if you would find it difficult to pay your mortgage were rates to rise, then a fixed-rate mortgage makes sense. Otherwise, a 25 basis points increase in interest rates would mean an extra £64 a month, or £756 a year on a £500,000 mortgage with an original rate of 2.5 per cent and 25 years left on the mortgage term.

While the Chancellor did not reform capital gains tax (CGT) and aligned rates with income taxas expected, he did increase the timeframe in which people who sell property have to pay the tax from 30 to 60 days. This will be useful for those landlords in particular who have to pay CGT on property sales, giving them a little more time to pay the tax due.

Those looking for a mortgage and housing markets or who haven’t refinanced in some time should speak to AWS Private Finance about securing a deal. Most mortgage products last between three and six months, depending on the lender, so even if you don’t need a mortgage immediately you can book a rate with us for when you do. We are a whole-of-market broker so compare all the deals on the market and are particularly experienced in arranging large loans. We can identify whether a private bank or high-street lender offers you the best option and pricing. We have excellent relationships with the private banks so can recommend one where required but will also consider more mainstream lenders too. Please get in touch for more information.
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