A Word On The Mortgage Market

AUTUMN BUDGET SPECIAL

Welcome to the latest edition of A word on the mortgage market. To say it has been an eventful couple of weeks would be somewhat of an understatement. So, in our usual way, we thought we would cover recent events and offer some perspective on what this means for UK mortgage borrowers.

As always, we hope you find A word on the mortgage market useful and informative. If you would like to discuss any of it and what it means for you then please get in touch with your consultant, whose details you will find towards the end of this note. Let’s jump in to discuss the budget, rates and the return of you know who.

The budget

Let’s begin with a look at last week’s autumn budget statement, the first one of the new(ish) Labour government. Aside from the wider implications of the announcements, there were a number of housing market related decisions to consider.

Stamp Duty Land Tax Changes (SDLT)

Coming into play from April 2025, the SDLT exemption threshold for first-time buyers will decrease from its current level of £425,000 to £300,000. Purchases between £300,000 and £500,000 will incur a 5% SDLT on the portion above £300,000. Properties priced over £500,000 will not qualify for first-time buyer relief.

There is no way to sugar coat this. The reduction in SDLT relief thresholds may increase upfront costs for first-time buyers, potentially affecting affordability and purchasing decisions. But, if we can be so bold, that is where we come in. Only specific, individual advice will help ensure that if you are buying your first home you get the best possible mortgage. And, of course, if a first-time purchase over £300,000 is on the cards, it would be sensible to move quickly.

Additionally, the SDLT surcharge on additional properties, such as buy-to-let investments and second homes, increased from 3% to 5% with immediate effect. Again, this is not welcome news, but good advice can help you understand what this means for your overall financial picture.

Affordable Housing Initiatives

The government confirmed additional funding for the Affordable Homes Programme AHP, aiming to boost the supply of affordable housing. This includes a £3 billion guarantee to support small house builders, facilitating increased construction of affordable homes.

Impact on the mortgage market

When the budget was first announced, the amount of spending, it is fair to say, took more or less everyone by surprise. Us included. Yet, thankfully, more than one week on from the event, it appears we have avoided a market disaster such as we saw after the ill-fated Truss Autumn Statement. This was borne out when the MPC decided to push ahead with a further cut to Bank Rate yesterday. Which, as if by magic, leads us nicely onto the next part of a word on the mortgage market.

Rates

Just yesterday, The Bank of England’s Monetary Policy Committee cut the Bank Rate to 4.75%. Normally, this would be cause for mild celebration, but the general uncertainty caused by the budget, the change of the guard in the US (more on that to follow) and the ongoing conflicts in the middle east and Ukraine, means it’s not all rosy.

The markets had generally already priced this cut in, so we are not expecting a raft of positive movement on mortgage rates. But, as always, some lenders may decide to price downwards. As always, our advice remains the same. Get advice. Your consultant will be able to advise you whether to remortgage, or simply switch to a new mortgage with your current lender. And they can even change to a better rate at a moment’s notice (should one become available) as they have access to the lenders’ most up to date products every minute, of every day. Amongst many other things, it’s what we are here for.

Across the big pond, the Fed also decided to cut their cost of borrowing. As you know, in September, they went big with a 0.5% cut, but this time they plumped for just the 0.25%, moving their range to 4.5%-4.75%.

Just a few months ago, it looked like rates were going to continue to head south throughout 2025. We should be used to this now, given what we’ve been through over the last few years, but it feels like the picture has changed.

We are now not expecting a further cut in December. Looking further afield, while a consensus exists that the Bank Rate will decrease in 2025, projections vary regarding the magnitude and timing of these cuts. Factors such as inflation dynamics and fiscal policies will play crucial roles in shaping the Bank of England's decisions. Indeed, in yesterday’s press conference, the governor of the Bank of England, Andrew Bailey, clearly indicated that more cuts were to come, but it would be a "gradual fall from here", as well as being dependent on both domestic and global factors.

If we were forced to make a prediction (acknowledging that it’s a fool’s game to do just that), we think we will get two or three cuts in 2025.

And finally, he’s back

So, Trump is back. We’ll be honest. We’re not really sure, at this stage, what this will mean. If we are being kind, it will keep us on our toes. Ironically, one thing is for certain; nothing is certain. Only time will tell.

That being said, one thing of note. Despite all the talk about a tight election result, it turned out to be anything but close, a fact the markets are likely to welcome. Early indicators look promising, with stock markets on the rise and swap rates staying steady, defying many earlier predictions. Every cloud and all that.

Of course, we’ll keep you updated with our thoughts over the coming months.

It’s good to talk

We very much hope you've found A word on the mortgage market useful and interesting. If you'd like to discuss anything we've talked about. Or indeed if you have any other mortgage related needs, then please do get in touch with your adviser. Until next time, we bid you adieu.