what the Budget means for the property market
Chancellor Jeremy Hunt delivered his first full Budget this week and unlike previous budgets from his predecessors, there was little for the housing market as he focused on pensions and childcare instead.
While the almost total absence of housing measures came as a surprise given how important the housing market is to the overall health of the economy, as well as how essential it is that people are able to afford good quality housing, it also came as something of a relief to investors in particular. Landlords have been hard hit on the tax front in recent years and will have been thankful not to bear the brunt of any additional taxation this time around.
Anything that has a negative impact on the number of transactions would also have been extremely unwelcome given that the housing market has settled down considerably since the fallout from Kwasi Kwarteng’s mini-Budget in September. Swap rates, which underpin the pricing of fixed-rate mortgages, soared on the back of that Budget but have since settled, leading to a reduction in fixed rates. Thankfully, there doesn’t seem to be anything in this Budget to change that.
Inevitably, there are fewer transactions taking place with HMRC reporting a dip in number in January as rising interest rates and the cost of living mean affordability is more of an issue for buyers. But the real concern around transactions is that they are taking so long, which is why we are seeing many borrowers turn to bridging finance in order to expedite their purchase.
It would have been good to see some reform of stamp duty, particularly for downsizers, to encourage more transactions and stimulate activity in the market. However, the Chancellor has chosen not to intervene at this stage and we hope he may come back to this at a later date.
The Office for Budget Responsibility’s forecast for inflation at 2.9 per cent by the end of 2023 is extremely welcome and will have a further settling effect on the housing market should this prove to be accurate. The Prime Minister has already pledged to halve inflation from its current level of 10.1 per cent by the end of the year and this projection goes much further than that. It already looks as though interest rates may have peaked or are close to doing so, and inflation falling so decisively will help with that.
other measures
In order to encourage the over-50s to return to, or stay in, work, the standout measure was the abolition of the Lifetime Allowance, a cap on the level of pension contributions that can be accumulated before a charge is applied. The annual allowance was also increased from £40,000 to £60,000, enabling a higher level of pension contributions to be made.
To persuade more parents back to work, the other big announcement was 30 hours of free childcare a week for working families of children aged under five. However, there was some criticism of the decision to phase in this provision, with families needing to wait until September 2025 before the full allowance is accessible.
our verdict
With sentiment better on the economic side than it has been in recent months, overall, this Budget should be a welcome boost for confidence. If inflation can be drastically reduced, this should have a positive impact on interest rates and affordability, which could further boost buyer confidence and transactions in the housing market.
how MT Finance can help
MT Finance are here to help. Our bridging loans are available for up to two years, with interest retained for the full period if preferred, so there are no monthly payments for 24 months.
We do not impose early repayment charges so if circumstances change and borrowers need to exit early, there are no financial penalties. Our team can be contacted online via phone on 0203 051 2331 or via mailto:enquiries@mt-finance.com.