Spring Budget 2024 on property and mortgages be like this for contractors…

So, Jeremy Hunt has delivered what may be his last Spring Budget during his chancellorship, writes John Yerou, CEO of contractor mortgage brokerage Freelancer Financials.

But, which announcements, if any, will impact homeowners, mortgage borrowers and contractors looking to get on the property ladder? Let’s home in on his offerings (or not) to UK housing.

The Neither Budget (contains missed opportunities)

Unfortunately for the chancellor, mortgage and property experts are already labelling Jeremy Hunt’s Spring Budget 2024 as a ‘missed opportunity.’

He could have both stabilised the housing market and improved prospects for first-time-buyers and home-movers.

He did neither.

There were serious hopes that the Spring Budget 2024 would bring new schemes to help first-time buyers. Or, as a Plan B, he could have at least reintroduced the Help-to-Buy scheme, which ended last year.

Neither got a mention.

And what about the much-lauded 99% mortgage scheme, which was bandied about in January? Zip. Nada. But that policy not seeing daylight may be a blessing, as it simply wasn’t fit for purpose.

Stamp Duty Land Tax

The much-anticipated Stamp Duty reform many of us have been hoping for failed to materialise at yesterday’s Spring Budget. What happened to Stamp Duty relief for first-time buyers, home movers and downsizers? This should have been an open goal.

Stamp Duty is a substantial consideration for all homebuyers above the minimum thresholds.

Hunt’s decision to not reduce it will impair the ability of homeowners to either move up the property ladder or downsize. And one thing the housing market needs right now is freedom of movement.

Instead, the Chancellor decided to scrap the current Multiple Dwellings Relief (MDR) from June 2024 for those buying more than one house in a single transaction.

The removal of MDR is expected to raise a paltry £385million a year.

The furnished holiday lettings tax regime will also be scrapped in April 2025. This, forecasts Hunt, will raise £245m per year. It’s almost as if he’s not taken this opportunity seriously.

Multiple dwellings relief scrapped

Scrapping MDR will undoubtedly have a negative impact on landlords and their tenants. Let’s face it - who buys more than one property at a time? Either landlords or the extremely well-off.

The majority of the UK’s tax-paying homeowners have probably never heard of MDR, let alone care about it. But its effects may yet impact those renting and currently saving a deposit for a home.

Many landlords were hoping for more government support for the buy-to-let sector.

Even an act as simple as removing or reducing the additional 3% Stamp Duty levied on investment properties would have helped.

Many property experts believe we should be encouraging landlords to invest in more properties. It would increase supply in the private rental sector and the competition keep landlords honest. That’s less likely to happen after this budget.

Tax relief for holiday lets scrapped

The furnished holiday lettings tax regime (‘FHL’ regime) offers tax advantages to those who let out a property as a holiday home. This scheme will also now be scrapped from April 2025.

Buy-to-let landlords, with the exception of those incorporated as limited companies, flocked to this model after the systematic reduction in relief they could claim against residential property repayments eroded profits.

As it stands, FHL landlords can claim tax relief on 100% of mortgage repayment interest against their rental income. This has the knock-on effect of potentially lowering Capital Gains Tax should the landlord sell, too.

Some 127,000 properties currently utilise the FHL regime; contractors among that number. According to the chancellor, in the run-up to today’s budget that volume created “a distortion, meaning there are not enough properties available for long-term rental by local people.”

Can anyone else see the contradiction? If Hunt hadn’t removed the Multiple Dwelling Relief tax, he wouldn’t have to worry about there not being enough rental properties for locals!

Either way, if landlords decide to sell their FHL properties, more residential properties for locals will come back to the market. People who’ve been forced away from the seaside towns where they grew up will be the ultimate beneficiaries.

Capital Gains Tax reduced

I still can’t get chancellor’s logic with his CGT move yesterday.

Capital Gains Tax is what you pay HMRC from the sale of a large asset, such as property. The lower rate, for basic rate taxpayers, is 18%. This will stay as is.

But, the current higher rate of CGT on residential sales is 28%. In order to raise funds, the chancellor is reducing that rate to 24%.

His belief is that the lower rate will see an increase in volume of transactions. Surely, by that logic, Stamp Duty would have been the tax to go for?

And when does he foresee reaping the benefits of such a reduction? Most landlords are in it for the long haul. Long-term capital appreciation and annual yields from their rental income.

They’re not going to sell up to save 4% on CGT. No. No matter how much I run this move through my head, it will not compute.

#1 priority: affordable housing – hardly gets a look in

Halfway through last year, then-housing secretary Michael Gove abandoned any hope of hitting the Conservatives’ 300,000 target for new homes. That was on the back of years of missing targets.

Almost any barrier to mortgage interest rates coming down, you can relate to a lack of affordable housing. Even inflation. If there’s more demand than supply, prices go up. It’s basic economics.

Accessible newbuilds should have been priority #1 on Hunt’s housing agenda.

But they hardly got a look in -- just a throwaway commitment to build 8,000 new homes in Barking Riverside and Canary Wharf. The budget? £242M. So, robbing Peterhead to pay for St. Pauls, then.

Hunt didn’t want to poke the bear

The state of newbuilds is so bad that the Competition and Markets Authority has launched not one but two probes into what’s going on in planning departments. We need reform across the board, but it seems as though Hunt didn’t want to poke that bear this time around.

With forecasts for immigration only going up, our lack of homes to put people in is only going to exacerbate today’s problems.

I don’t know; this Spring Budget just felt like a platform for another round of empty promises. How can the Conservatives position itself as the party of homeownership and aspiration? Beggars. Belief!

Inflation forecast to drop below 2% in the coming months, says OBR

The one bright spot was the OBR’s forecast for inflation (but do bear in mind this is because of the work of the Bank of England, not the government).

According to the chancellor, we will see inflation hit the 2% target as soon as next month.

Yes, it’s good news. But it’s not unexpected. We’ve known for months that the reduction in the energy price cap in April will lead to inflation plummeting.

Lower inflation does provide more financial stability. The knock-on effect could be that (potentially) swap rates stabilise, or even reduce. This could also tempt the BoE to reduce its base rate, currently at 5.25%.

But let’s not get carried away. The bank has had visibility of this for at least two months. So far, it’s not budged from its statement that the base rate will ‘begin to come down in the summer of 2024.’

If the BoE sticks to its guns, we can expect reductions in its base rate of consecutive 0.25%, bringing us close to 4% at year-end. By how much and when mortgage lenders will risk reducing their rates, we’ll have to wait and see.

However, it’s not plain sailing. Inflation is not immune to effects in the global economy. Setbacks in either Ukraine or the Middle East could derail any current plans. Perhaps the BoE is right to advise caution.

Final thoughts

No one in the property or mortgage industry, including homeowners or tenants, will be sleeping any easier tonight. The shot in the arm we needed was obviously on order from PPE Medpro, and we’re simply yet to see it!

Fixing first-time buyer Stamp Duty at £425,000 would have helped a generation wondering if they’ll ever afford a home. £25,500 is the average sum someone buying their first home needs to raise. How will they afford that with other measures in Spring Budget almost forcing landlords to increase their rents?

The failure to act on SDLT reform is bewildering. It’s one of the largest barriers to purchasing a property.

Why wait until the (possibly) pre-election Autumn Statement of 2024 to make changes? People could have been seeing the benefits by then.

Now, should the announcement come later this year, it will sound like vote-winning rhetoric.

Worse than that. If homeowners hold back from buying a home in the face of pre-election SDLT holiday rumours, and that holiday doesn’t happen, the cost to them could be immense.

Despite predictions late last year, house prices are going only one way: up.

Until supply outpaces demand, it will always be a seller’s market.

Fiddling around the edges (as Spring Budget 2024 does) has seemingly helped nobody. Let’s hope we get through summer unscathed and a fresh wind blows for autumn; maybe with a new broom to sweep clean at HM Treasury to boot. We live in hope!