Autumn Statement 2023: a derelict mini-Budget for housing, mortgages and buy-to-let

Yesterday’s Autumn Statement 2023 felt like a swing and a miss, with a chancellor tinkering around the edges, ducking anything substantive.

At times, it almost felt like this government was out of ideas; and even out of touch with what people really need and want. There was nothing bold about it, writes John Yerou, CEO of Freelancer Financials.

Where chancellor Jeremy Hunt should have helped on homes and houses

Based on what we assessed on the eve of Autumn Statement to be needed, the chancellor missed a golden opportunity to make changes that would stimulate the housing market and kick-start the economy.

There was no mention of pressing topics related to the mortgage and property industry, such as:

• Inheritance Tax (IHT),
• support for landlords,
• and the widely anticipated reforms to Stamp Duty (SDLT).

Mortgage Guarantee Scheme (MGS) extended for 18 months

The extension of the MGS scheme, which supports the availability of 95% loan-to-value (LTV) mortgages, was initially scheduled to end on December 31st 2023. There was no mention of it in the House of Commons, but changes to it were revealed in the Treasury’s Autumn Statement policy paper.

So the MGS was yesterday extended to 2025, meaning it will now end in June 2025 instead of December, making it available for an additional 18 months. We believe the extension to the MGS is the least the government could do for first-time buyers.

About the Mortgage Guarantee Scheme

The government introduced the Mortgage Guarantee Scheme in spring 2021 with the aim of helping prospective borrowers with homeownership. Its purpose is to give first-time borrowers access to mortgages on properties worth up to £600,000, using only 5% deposit.

The government offers lenders the option to buy a guarantee from them on 95% LTV mortgages. This compensates lenders for a portion of net losses if the property has to be repossessed.

Not all lenders subscribe to the MGS. Nationwide has continually offered products to those with small deposits outside of the scheme. Their Helping Hand range lends up to 95% LTV, and up to 5.5 times income.

No Stamp Duty Land Tax (SDLT): a missed opportunity

Many including us were yesterday left disappointed that hoped-for cuts to stamp duty did not materialise from Jeremy Hunt. It now looks like the chancellor is holding SDLT changes back as a sweetener before Spring Budget 2024, and the general election.

It’s not only young first-time buyers left discouraged by the SDLT omission. Older homeowners who want to downsize are reluctant to move because of the high cost of taxation.

Changes in SDLT would have encouraged older people over 55-years-old to move into more suitable housing. This, in turn, would free up larger family homes for younger families moving up the property ladder.

Support for house building and planning approvals

Autumn Statement 2023 announces a number of measures to enable the development of new housing stock.

Hunt also promised to remove the barriers to the existing cumbersome planning process, providing faster approvals for applications.

How many times have we heard this over the past several years?

The Conservative party would like us to believe they’re “the builders, not blockers”. But this claim (which is actually what Labour insists a Sir Keir Starmer-led government would be) has not once materialised. We’ll have to wait and see if Hunt’s vow yesterday to “unlock the building of new homes” amounts to anything. It is very possible that the Conservatives will not remain in power long enough to act on this recycled pledge.

Simplifying planning for converting single dwellings into two flats

The chancellor used Autumn Statement 2023 to promise to speed up the planning process, potentially making it simpler to convert houses into flats.

Investors and developers will welcome the news, but more detail is required. As Mr Hunt himself is a portfolio landlord, I imagine the Treasury will make this amendment a priority, even if his fellow MPs might be drawing up questions about ‘conflict of interest’ at this very moment!

Chancellor promises to help families struggling to afford rising rents

The government yesterday pledged to provide support for families and the most vulnerable on housing benefits struggling with high rents. This will give 1.6 million households an average of £800 of support next year.

The move will come into force next April and will cost £1.3bn in the 2024/25 tax year, rising to £1.7bn in the 2028/29 fiscal year.

Am I being too cynical by thinking that, as a landlord, Hunt will be a beneficiary of renters now being able to afford to pay their landlords? Moving on…

No help for buy-to-let landlords

Many contractors use buy-to-let investments to supplement their income or shore up their pension. They, and all landlords, needed Mortgage Interest Relief reviewed, but it didn’t happen yesterday.

Property investors were desperately hoping for the abolition of Section 24 (S24) as part of this announcement. No such offer was forthcoming. Perhaps the chancellor thought that making this a wholly landlord-friendly mini-Budget would raise suspicion and accusations of self-interest!

What is Section 24?

Section 24 removes a landlord's right to deduct the majority of their costs from their rental income before calculating their tax liability. These costs included:

• mortgage interest
• interest on the property-centric loans (e.g., furniture, décor, etc.), and
• lender arrangement fees.

The government confirmed they would continue to set mortgage interest relief against rental income only at the basic rate of tax. This is a genuine missed opportunity for everyone in the rental sector chain. S24 is directly responsible for rising rents and limited availability of suitable properties for tenants. Indeed, a survey by London estate agency Benham and Reeves has found that 73% of its landlord base who have plans to exit the sector would refrain from doing so if these changes were reversed.

The future?

Let’s hope there’s more substance in the pipeline for Spring Budget 2024. It will likely be Hunt’s swansong, so he’ll want to portray himself and the government in the best possible light. Of course, depending on which side of the fence you sit, the Conservatives’ ‘best possible light’ paints a wholly subjective picture onto your property and its financial implications.

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