Mortgages fall behind as stubbornly high interest rates hit household finances
In a landmark moment for UK politics, Chancellor Rachel Reeves delivered her first budget on Wednesday, leaving many to wonder whether it was more trick than treat for both consumers and businesses.
Within the first Labour budget in 14 years – and the first delivered by a female in UK political history – Chancellor Reeves outlined a raft of changes to UK taxation, aimed to raise a reported £40bn, with the country’s schools and hospital appearing to be the beneficiaries of the most left wing budget in generations.
An additional £22bn has been committed to the running of the NHS, and schools have been granted £6.7bn to upgrade infrastructure and facilities, two areas that then-opposition Labour have long since criticised the previous government for neglecting.
Reeves, a former Bank of England economist, went on to outline some stark changes that will impact the property market with immediate effect.
Stamp Duty was first on the hit list, with the 3% second property surcharge increased to 5% overnight, meaning many investors in the process of buying property will have to find thousands in additional unbudgeted tax in order to complete transactions.
The surcharge applies to anyone buying a property that is not their main residence, including holiday homes or those buying property for their children to live in.
The biggest impact however will surely be felt by landlords and property investors.
Olivia Harland, Senior Mortgage Consultant
“The Buy to Let market has had shockwaves sent through it this week, but the knock-on impact throughout the property industry could be significant” says Olivia Harland, Senior Mortgage Consultant at Cleerly.
“The bombshell that the additional 2% would come into effect immediately not only means those looking to complete imminently have to stump up thousands in order to do so, but the wider ramifications for those property purchase chains that have any buy to let transactions with them could be catastrophic.
“If you’ve already exchanged and now need to find an additional 2% in order to complete, what happens if you can’t?”
Meagre reductions in duty on draft alcohol, and the extension of a 5p fuel duty cut have done little to balance out what many see as a budget that will impact many in some form.
There was disappointing news for First Time Buyers elsewhere in the Chancellor’s statement, with the end of the current Stamp Duty relief to end from April 2025.
Currently, those buying homes for the first time are exempt from duty up to £425,000, however this is a temporary measure introduced in 2022’s mini-Budget when the threshold was increased from £300,000. This week’s budget removes that relief, and means that once more anyone buying over £300,000 from April will be subject to the tax.
“An average UK property stands at around £328k, so this alone means that nearly £4,000 in additional fees will be levied on First Time Buyers come April next year” continues Harland. “Many first timers than ever are relying on family assistance as it is, so this could push the bottom rung of the property ladder out of reach for many aspiring homeowners.”
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