What will be in the autumn Budget?

It is arguably the most hotly anticipated fiscal event in recent memory – and today, Rachel Reeves will finally unveil her autumn Budget, with speculation rife in the mortgage industry about how it will impact the market.

Reeves’ statement to the House of Commons at around 12.30pm, will be the first Labour budget in 14 years – and the first delivered by a female Chancellor.

It will also be tough, as we’ve repeatedly been told since Keir Starmer entered 10 Downing Street in early July, and the government has strived to balance the books.

All of this will very likely shape mortgage business in the coming year, so professionals throughout the industry will be keenly watching the Budget unfold, each with their own views on what the Chancellor should do.

Nicholas Mendes (pictured left above), mortgage technical manager at broker John Charcol, is urging measures to support first-time buyers and address housing affordability, including an increase to the Lifetime ISA property cap.

“The Lifetime ISA was introduced to help first-time buyers save for a property, but the £450,000 cap has remained unchanged since 2017, despite the rise in house prices,” Mendes told Mortgage Introducer. “Raising this cap to better align with current market conditions would allow more buyers to benefit from the savings scheme and government bonus without penalising those in high-cost areas.

“Additionally, I would like to see an extension of the stamp duty holiday. With the holiday set to end, first-time buyers could soon face higher costs. Extending or adjusting the stamp duty relief, by keeping the threshold at £425,000 and applying it to homes valued up to £625,000, would continue to support the first-time buyer market while stimulating the broader housing market, benefiting home movers and downsizers alike.”

Mendes acknowledged that VAT isn't expected to rise, but other factors in the budget could influence inflation and, in turn, affect interest rates.

“A fuel duty hike would likely raise the prices of various goods due to increased transportation costs, potentially adding to inflation,” he said. “As for infrastructure spending, while a large-scale initiative could drive inflation up, much depends on global supply and demand for materials.”

Rachel Reeves' concerns about the so-called budget ‘black hole’ largely reflect the complexities of balancing government income and expenditure, Mendes suggests.

“While net debt interest cost in 2023/24 was significant at £102 billion, the fall in inflation may help reduce these costs by lowering index-linked debt interest, though it also reduces the fiscal drag benefit to the government,” he reasoned.

“From a mortgage perspective, any immediate interest rate changes following the budget are unlikely to alter the medium-term trend in bank rate reductions, though they may influence the pace of cuts. I anticipate that the downward trend in mortgage rates will resume before the end of the year, likely returning to the best rates we’ve seen recently, with further improvements next year.”

Mendes expects the lowest fixed rates to stabilise around the low 3% range next year. Lower interest rates should support property prices, and he anticipates about a 5% increase in 2025, following similar growth this year.

What will the budget mean for first-time buyers?

Gerard Boon, (pictured right above) managing director of Boon Brokers, noted that Labour has made it clear that they need to plug a £40bn gap in the UK’s public finances. He is therefore anticipating significant tax rises in the Chancellor’s statement, and - like Mendes - is concerned about the knock-on effect for first-time buyers.

“There are a couple of predictions for the budget that would directly impact the property market,” he said.  “Firstly, the change in Stamp Duty Land Tax for first-time buyers, reverting back to a tax exemption up to a £300,000 purchase price instead of £425,000. This will add further upfront costs to first-time buyers when buying their first home, who largely struggle to purchase a property due to a lack of deposit rather than lack of mortgage affordability. Therefore, this change could have significant implications for first-time buyers and keep them trapped in the UK’s vicious rental market for longer.

“Secondly, it is predicted that Labour will launch a Freedom to Buy scheme, essentially making the government’s current mortgage guarantee scheme permanent, which was set to expire in June. This is a welcome change.”

Boon expects an increase in capital gains tax too, and a possible rush of landlords looking to sell their existing properties before any change is enforced.

“They would look to escape a market that is already unattractive for them, given the high mortgage interest rates and unfavourable market conditions – such as being unable to offset interest for tax purposes unless the property is owned through a limited company,” Boon commented. “This capital gains tax change would be a real concern for me. In a time where we should be incentivising new landlords to join the property market, to increase the supply of buy-to-lets and reduce inflationary pressure on rent, this change would do the exact opposite.”

Less supply of property in the buy-to-let market would further increase rental payments and make it even more challenging for young people to save for a deposit and get onto the housing ladder, he believes. “Let’s hope these tax rises are not too severe as the buy-to-let market is already on its knees,” Boon said.

Read more: Labour’s bid to help UK renters could backfire - analysts

What can the government do about the housing crisis?

Decisive action from the Chancellor is what Alistair Nimmo is seeking. As director of marketing at Family Building Society, Nimmo (pictured left below) wants Reeves to get a grip on housing.

“Be bold!” urged Nimmo. “Grasp the housing crisis nettle and bring back the stamp duty holiday. We know that this highly successful policy worked - it got the housing market moving and generated an uplift in economic activity, exactly what we need now.

“Failing that, exempt ‘last time movers’ from Stamp Duty to free up more appropriate properties for growing families and those that need to move because their job circumstances change. If you can solve the last time mover problem then you are likely to go some way to solving the first time buyer problem.”

He added: “Stamp Duty is, of course, just one piece of the housing policy jigsaw and one of the easiest to see immediate benefits from, but the problem is policy makers, and local and national governments, don’t see the whole picture. And because of this myopic view, it’s unlikely we will see any change on Stamp Duty apart from the widely rumoured reversion of the changes made in the mini 2022 budget.”

With a high number of first-time buyers among her client base, Serena Smith (pictured right below), mortgage and protection adviser at Mortgages with Serena, urges the government to take a more realistic view of the demographic of those trying get onto the property ladder. She wants it to better understand the impact of Stamp Duty on them, and she also believes that schemes to boost their ability to buy need reviewing.

“It’s time the entire housing system was reviewed based on the current situation and with a forward look over the next 50 years, not just right now,” said Smith, “also looking at what’s changed in the previous 50 years. It always seems to be a knee jerk reaction from the eyes of those with a generous income and no experience of a lower income household and thin credit file.”