Spring Budget 2024
The housing market has had a very busy start to the year with agreed sales up by over 20% on the previous year as buyers return to the market. Fixed interest rates have edged up 0.50% in the last month, but are still significantly below where they were last summer and autumn when the purchase market seemingly went into hibernation.
While yesterday’s budget was considered light on policies that have a direct impact on the housing and mortgage markets, we've outlined some of the key takeaways that could lead to greater affordability and increased transaction numbers.
The mortgage market
The Chancellor confirmed that the Office for Budget Responsibility (OBR) expects inflation to reduce to it’s target rate of 2% in May. Whilst the economy appears to be growing again following a shallow recession in the second half of 2023, the OBR are only predicting growth in GDP of just 0.80% this year. Taken together, one would assume that this would give reason for the Bank of England to start reducing their base rate to stimulate the economy. The traders are currently only pricing in two to three x 0.25% reductions this year, with perhaps three to four to follow in 2025.
The further 2% reduction in national insurance for employees and the self-employed worth £62pcm to those earning £50,000 or above, will improve mortgage affordability and enhance borrowing capacity. As will the lifting of the child benefit taper from £50,000 to £60,000. For someone earning £60,000 with two children, they will now be better off by £2,075 per annum, which would boost lending capacity by over £10,000.
The housing market
There was some bad news for those that own holiday lets and short-term lets in their personal names as the Chancellor announced he would abolish the significant tax breaks available under the ‘furnished holiday let’ scheme. This will boost transaction numbers as some owners will sell up, however, we expect those in cities to simply convert back to long term lets - for which there remains significant demand.
Higher rate capital gains tax on property has been reduced from 28% to 24%. The Chancellor said that despite the cut, the OBR have forecast that they'll collect more tax as a result of this due to increased transaction numbers, as it will encourage some landlords sitting on a gain to sell up.
As ever, we're here to answer any questions you may have about your mortgage options. Our team stay up-to-date on the latest economic data and market forecasts to ensure they provide the most up-to-date advice to help you make informed mortgage decisions. Give us a call or drop us an email today, and we'll be happy to help you make your next move.
Tim Lynch, Director