UK Housing Market Impact: Autumn 2023 Statement
The Autumn Statement for 2023 did not bring any significant surprises for the housing market. Speculations about a stamp duty cut to stimulate the market did not materialise. However, hidden in the details was the extension of the existing mortgage guarantee scheme.
The Mortgage Guarantee Scheme, initiated in 2021, aimed to incentivise lenders to offer 95% loan-to-value mortgages for buyers with a 5% deposit. Mortgages under this scheme are government-backed, providing coverage for potential shortfalls in case of buyer default. Initially set to end in December, the scheme will now run until June 2025, supporting prospective buyers with smaller deposits.
Expert Opinion:
Richard Donnell, Executive Director at Zoopla, emphasises the importance of supporting first-time buyers, acknowledging the challenges they face in securing mortgages and raising deposits. While the Mortgage Guarantee Scheme has assisted around 5% of first-time buyers in the last two years, Donnell suggests improvements to its affordability and appeal.
National Living Wage Increase and National Insurance Cut:
The Chancellor focused on increasing household incomes, a move expected to enhance housing affordability. The National Living Wage saw an increase, accompanied by a National Insurance cut for employees and self-employed individuals. These measures aim to inject more money into household budgets, particularly beneficial amid the ongoing cost-of-living crisis.
Inflation Target and Housing Affordability:
With the Bank of England projecting inflation to reach its 2% target in 2025, there is anticipation that mortgage rates may decrease faster than expected in 2024. This development could potentially lead to increased house sales. Zoopla’s Donnell emphasises the need for government policies supporting reduced borrowing costs and increased housing supply.
Investment in New Homes:
The Chancellor pledged over £110 million for new home developments, aiming to construct 40,000 homes and alleviate supply constraints. Additional funds, including £32 million to address planning backlogs and £450 million for the Local Authority Housing Fund, will contribute to building around 2,400 new homes.
Permitted Development Right and Rental News:
Plans to consult on a new permitted development right were announced, allowing the conversion of any home into two flats, with the exterior remaining unchanged. Additionally, the Local Housing Allowance rate, frozen since 2020, will be increased, providing support to 1.6 million households, averaging £800 per household next year.
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