Homebuyers face more than just higher stamp duty, says lending firm exec
Swap rates rose significantly following the UK government’s Autumn Statement last week, a shift that could drive up mortgage costs for homebuyers.
Data analysis by specialist property lender Octane Capital showed that the one-year swap rate climbed 0.03% to 4.543% on Thursday, shortly after the Budget announcement, while the five-year swap rate increased by 0.05% to 4.277%.
Though both rates eased slightly by Friday, they remained above pre-Budget levels. By Monday, the one-year swap rate had risen to 4.551%, its highest level since early September, and the five-year rate reached 4.287%, a peak last seen in July.
With swap rates on the rise, Octane Capital chief executive Jonathan Samuels (pictured) warned that the effects of the Autumn Statement might extend beyond stamp duty changes, with mortgage costs likely to increase sooner than expected.
“The Autumn Statement wasn’t well received by the bonds markets and gilt yields shot up almost immediately, with bond investors understandably concerned about the amount of borrowing announced given that it was more than expected,” Samuels said.
Last week’s Autumn Statement offered little direct relief for the housing market, which has been struggling under high mortgage rates. While second homeowners and landlords avoided a hike in Capital Gains Tax, they face a 2% increase in Stamp Duty Land Tax. The government also did not extend stamp duty relief for first-time buyers, with current relief thresholds set to expire in March 2025.
“The mortgage market had been heading very much in the right direction following a very tough period, and so the hope is that this initial increase in swap rates is an overreaction rather than the first of a series of bond hikes like that seen following the Truss mini budget,” Samuels said.
“The hike to second home stamp duty charges certainly won’t help the situation though and should landlords also see the cost of borrowing climb along with mortgage rates, a double-pronged increase in investment costs could give the private rental market a very negative jolt.”
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