Government budget updates: key takeaways

Spring budget 2023: mortgage market impact

No new support for first-time buyers 

With the government focusing on continued support for energy bills and the ongoing battle to wrestle inflation back into its box, there is little room for new homeownership support for first-time buyers. 

Money Saving Expert’s Martin Lewis submitted a report to the government in January 2023 which urged parliament to update the draconian rules and thresholds linked to Lifetime ISAs (LISAs).

The challenges he raised for first-time buyers were:

  • The LISA property limit of £450,000 has not increased since the scheme’s launch in 2017, despite property prices rising dramatically in that time. 

  • LISA customers should not have to pay the 25% penalty fee to access their money (including the forfeiting of any government bonuses) should they purchase a property above £450,000, due to rising property prices.

  • He argues the penalty fee should be reduced to 20% so only the government bonuses would be forfeited. 

It’s disappointing to learn this has not at least been discussed in this spring’s budget. 

No relief for buy-to-let landlords

Stifling taxes and bureaucracy has caused the buy-to-let market to dampen in recent years. The costs for landlords are ever-increasing, causing private rent prices to spiral. 

A petition to reinstate tax relief allowing mortgage interest to be set against rental income has gathered more than 38,000 signatures – a show of force from landlords. The reinstatement of tax relief would provide a significant boost to the buy-to-let market. 

As is the case for first-time buyers, it’s disappointing no announcements were made to support the UK’s housing market at this time. 

Mortgage rates update

The Institue for Fiscal Studies (IFS) provided a stark reality in February 2023 by detailing the expected adverse conditions mortgage holders are facing this year:

Across all households with a mortgage, we estimate that an increase in mortgage rates from 2% (the typical 2021–22 rate) to 5.8% (in line with Bank Rate increases since 2021–22) would on average reduce incomes after mortgage payments by 7.5%. This rises to 10% for those aged under 45, who tend to have larger outstanding mortgages. Due to the prevalence of fixed-rate mortgages, this is a cost shock that will be rolled out gradually, but around 1.4 million households will come to the end of a fixed-rate deal during 2023.

While the three-month energy bill freeze is welcome news for household budgets, many will still be facing a coming struggle this year. 

As the IFS states, more than 1.4 million will come to the end of a fixed-rate deal in 2023. We strongly suggest you begin your remortgage process six months before your current deal is due to expire. This way, you can secure a suitable rate and still have time to monitor the market to see if rates come down. 

This is where can help you. We have saved customers hundreds of pounds per month this year by switching to them a suitable rate when they remortgage. 

Autumn budget 2022: breakdown

Key takeaways

Stability. Growth. Public services. These are the three pronouncements the Chancellor of the Exchequer used to preface his Autumn 2022 Statement with. To achieve this? Austerity. Taxes have risen for millions and public spending has been cut. There is less money in people's pockets for the foreseeable.

What does the Statement mean for the housing market? There was precious little information given during the Chancellor's speech. His plan to reduce mortgage rates was seemingly rolled up into the overall strategy to tackle inflation and the cost of living crisis.

There were, however, some glaring statements and surprising omissions. Here are our main takeaways of the Autumn 2022 Statement in relation to the property market:

  • No new support for first time buyers, despite Help-to-Buy ending for new applicants on 31st October 2022.

  • Stamp duty cuts installed by Liz Truss and Kwasi Kwarteng to remain until 2025.

  • Short-term holiday let taxation remains untouched.

  • Capital gains tax raid on buy-to-let landlords confirmed: £12,300 annual exempt amount cut to £6,000 in 2023 and to £3,000 in 2024.

  • Council tax can be raised by 5% by local authorities, in order to support social care.

  • Energy bills confirmed to rise in April 2023, despite help being extended.

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