Anderson HarrisMarket Insight
Anderson Harris reflections on the Chancellor’s Spring Budget
The Anderson Harris team look back on a Spring Budget which, on the face of it, offered little for the property or mortgage market… or did it?
There had been much anticipation ahead of the Chancellor’s Spring Budget in the property market. With house prices falling, and a general market slow-down forecast, many in the industry were hoping for positive interventions – such as a reduction in stamp duty. There was also hope for greater support for landlords and first-time buyers.
Inflation-reduction driving decisions.
A key goal of the Chancellor’s is to halve inflation by the end of this year (in January, it stood at 10.1%). In his speech, Jeremy Hunt boasted that the Spring Budget’s measures had given The Office for Budget Responsibility confidence to forecast that the CPI inflation rate would fall to just 2.9% by the end of 2023.
September’s stamp duty rates still stand (until 2025)
In achieving that ambition, support for the property sector was somewhat lacking. Perhaps the Chancellor had felt he’d done enough back in September. Then, upon taking the post, he temporarily increased the 0% band threshold from £125,000 to £250,000 in England and Northern Ireland, and raised relief for first-time buyers.
This meant the 0% band threshold for first-time buyers rose from £300,000 to £425,000. The maximum value of property on which they could claim the relief also rose from £500,000 to £625,000. These measures are still in place and are due to remain so until September 2025.
An unexpected boost
In the Spring Budget, a pleasant outcome for the mortgage sector came from an unexpected source.
In focusing on supporting working parents. Jeremy Hunt expanded free childcare to those aged over 9 months to three years.
The banks always scrutinise the childcare fees of potential borrowers, and this has a real impact on the affordability capacity of those seeking mortgages. Recently with rising costs, childcare fees have been making some families un-mortgageable.
This expansion of free childcare in 2024 will make un-mortgageable families (due to childcare costs), mortgageable. It could enable more to get on the ladder or secure the right property to meet their needs.
All await the Bank of England’s decision!
With little in the Chancellor’s Budget for property and mortgages, all eyes are now focused on the Bank of England’s Monetary Policy Committee. It meets on 23 March, just over a week after the Chancellor’s announcement.
In recent weeks it’s not been clear whether the Bank will increase the base rate or if we’re now over the peak. If rate rises are still warranted to stem inflation, this will further stress the market. If the Bank feels confident the economy is over the worst, many expect the base rate to remain where it is for the short-term, before embarking on a period of reductions – most likely towards the end of the year.
That said, faced with a slow-down in the property market, we have seen lenders reducing their fixed mortgage rates for the last 4 months. This could bring some welcome relief to those re-mortgaging or getting onto the property ladder. There are signs of a lenders’ price war emerging, with banks keen to get their share of a reducing market.
So, while there weren’t significant measures in the Budget to bolster the sector, there were some small glimmers of hope. The Anderson Harris team will follow developments over the coming weeks to ensure our clients can access the latest information at this challenging economic time.
If you are looking to move, re-mortgage or have challenges with your current property arrangements, talk to an independent mortgage specialist. They can help you take the informed decisions you need. Contact our team of specialists on tel 020 7495 6633 or email email@example.com.