Mortgage Strategy’s Top 10 Stories of the Week
This week: Budget 2024 brings changes with reduced Right to Buy discounts, increased social rents, and an improved OBR forecast for mortgage rates and house prices. Get all the details below:
https://www.youtube.com/watch?v=xD4SJE6rni4
Budget 2024: Right to Buy discounts to fall and social rents to rise
Chancellor Rachel Reeves announced cuts to discounts under the Right to Buy scheme in her Autumn Budget. Discounts, which currently offer up to 70% off for council tenants, will be reduced. Local authorities will retain the proceeds from home sales to reinvest in social housing. Additionally, the government will consult on raising social rents to provide financial stability for housing providers. These measures aim to increase affordable housing supply but have sparked concerns about their impact on homeownership for tenants.
Budget 2024: 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. Mortgage rates are expected to peak at 4.5% in 2027, while house price growth will slow slightly from 1.7% in 2024 to 1.1% in 2025. However, house prices are projected to rise by 2.5% annually from 2026 to 2030, supported by income growth. The OBR also predicts an increase in property transactions and housing starts.
Santander changes mortgage rates following BoE decision
Santander UK has adjusted its mortgage rates in response to the Bank of England’s decision to reduce the base rate by 0.25 percentage points to 4.75%. From 3 December 2024, existing Santander tracker mortgage products will decrease by 0.25%, including the Follow-on Rate (FoR), which will drop to 8.00%, and the Standard Variable Rate (SVR), which will fall to 7.00%. These changes aim to reflect the recent Bank of England rate cut.
Most landlords undeterred by Budget SDLT tax rise
Despite concerns over a potential capital gains tax hike in the Autumn Budget, UK landlords remain largely undeterred by the 2% increase in stamp duty on second home purchases. A survey by Benham and Reeves revealed that while 19% of landlords had paused their investment plans due to tax fears, 84% plan to maintain their buy-to-let portfolios in the next year. Only 11% of landlords intending to expand their portfolio were deterred by the stamp duty rise, which they view as a manageable cost.
Bank of England cuts interest rate to 4.75%
The Bank of England has reduced the base interest rate by 0.25% to 4.75%, following an 8-1 vote by the Monetary Policy Committee. This marks the second rate cut since August, after a series of 14 consecutive increases. The decision aligns with similar actions from European central banks. While inflation has fallen below expectations, and the economy shows signs of growth, there are concerns about potential economic overheating. The Bank is now cautious about further cuts in December to avoid stimulating the economy too much.
Industry reacts to BoE base rate cut
Following the Bank of England’s 0.25% base rate cut to 4.75%, industry reactions highlight mixed but generally positive sentiments. CHL Mortgages’ Ross Turrell notes this offers a boost to the property market, despite ongoing challenges. Market Financial Solutions’ Paresh Raja anticipates increased market momentum, while Phoebus Software’s Richard Pike advises caution, predicting limited changes to fixed mortgage rates. Overall, experts agree that the cut will stimulate market activity, benefiting homebuyers, landlords, and property investors, despite broader economic uncertainties.
FTBs prepare for 20% stock reduction when stamp duty threshold drops: eXp UK
From April 2025, first-time buyers (FTBs) in England will face a 20% reduction in available homes exempt from stamp duty, as the threshold drops from £425,000 to £300,000. Currently, 62% of homes fall under the £425k threshold, but this will decrease to 42% under the new rules, impacting over 90,000 properties. Some cities will see a larger reduction in SDLT-free homes, with Bristol experiencing a 34% drop. FTBs are urged to act quickly before the change takes effect in March.
Landlords face £6,000 Budget tax hike: Inventory Base
The recent Autumn Budget increases stamp duty on second homes in England from 3% to 5%, adding an average of £6,191 to the tax bill. For a home priced at the national average of £309,572, second-home buyers now face a tax of £18,457, up from £12,266. London, the South East, and other regions have seen even steeper increases. Landlords, already burdened by rising costs, face more challenges, with potential rent hikes to offset the tax burden, warns Inventory Base.
House prices expected to rise £84k by 2029: Savills
Savills predicts UK house prices will rise by £84,000 by 2029, driven by inflation returning to 2% and expected interest rate cuts. The estate agent forecasts a 4% increase in 2025, followed by a 23.4% rise by 2029 as mortgage rates ease. Despite ongoing cost-of-living pressures, house prices are expected to grow due to improved affordability and increased buyer confidence. However, the market may face short-term volatility due to mortgage rate fluctuations and changes in property taxation.
Pallett retires from Nottingham BS after 42 years in financial services
Alison Pallett will retire as Sales Director of Nottingham Building Society after 42 years in financial services. She joined the society in 2022 and strengthened its position in the mortgage and first-time buyer markets, launching specialist offerings like foreign nationals’ mortgages. Pallett, previously at LiveMore Capital and Bank of Ireland, received the Bharat Sagar Lifetime Achievement Award. Matt Kingston, currently Head of National Sales, will succeed her in March 2025, focusing on expanding support for homeowners and continuing the society’s evolution as a specialist lender.