How Autumn Budget 2024 affects homes, property and mortgages

At face value, there were few housing and mortgage surprises in Rachel Reeves’ first budget, even if it was the first-ever UK budget delivered by a woman chancellor.

What’s perhaps more pressing for your contractor mortgage is some of the actions we’re starting to see around the world, and the implications behind the corresponding headlines.

Much like the chancellor did yesterday at the House of Commons, let’s take it all in our stride, writes John Yerou, CEO of Freelancer Financials.

What does Autumn Budget do for first-time buyers?

The first thing to establish is what wasn’t in the budget.

For many months, our industry has been waiting to see what will replace ‘Help To Buy.’

Labour even outlined a successor, ‘Freedom To Buy’, in their 2024 election manifesto.

The scheme didn’t get a mention by Reeves in her speech or ‘green book’, though. So, we have to assume ‘FTB’ is a work in progress. Like first-time buyers, we wait with bated breath for the details.

Similarly missing in the Autumn Budget was any plan to extend the current freeze on stamp duty (SDLT) for first-time buyers.

As Labour has signalled no interest in extending the relief, the market assumes that first-time buyers will be paying SDLT at the same rates as everyone else come April 2025.

Increase in Stamp Duty Land Tax on investment properties and second homes

And, talking of stamp duty, the chancellor announced a somewhat ambiguous raise on second home/investment properties.

What is clear is that second home/investment buyers will pay an extra 2% on the first tier of stamp duty (from 3% to 5%).

What wasn’t clear, and still isn’t, is whether the 2% increase was across the board.

An educated guess

It doesn’t make sense to me that the government would only try to raise extra tax on the lowest tier. But nowhere did Reeves explicitly say the raise applied to “all” SDLT tiers. But I’m pretty sure that’s the case.

If it is to be the vehicle to “support over 130,000 additional transactions from people buying their first home, or moving home, over the next five years”, I’d assume the raise is applicable to all tiers.

But, like everyone else, we’ll be keeping our eye on the government’s documents in the next few days.

As the raise takes effect from today (October 31st), a clearer picture might be something which the government ought to prioritise.

Capital Gains Tax frozen on second homes and investment properties

While the rate paid on second homes and investment properties has not risen, holders of shares and other non-property assets will likely see their tax bills rise as a result of the decision when they’re sold.

The lower rate has risen under Autumn Budget from 10 per cent to 18 per cent, and the higher rate from 20 per cent to 24 per cent. Both increases apply from today, October 31st.

Homebuilding? Chancellor gets a tick

Essential to Labour’s 5-year plan is sticking to their target of creating 1.5 million new homes during this parliament. Reeves was keen to reiterate that pledge.

She confirmed that £3.1bn from this budget would be allocated to new-home construction. To underline that commitment, she’s given the deputy PM the responsibility of overseeing the first £500k of that investment.

In addition, there’ll be £3bn from this budget to support smaller developers and homebuilders. This is a solid move, and will help prevent the larger developers from tying up land waiting for it to rise in value, rather than getting on with the task of building.

A (huge) social housing step in the right direction

We know that there’s been chronic underinvestment in social housing since Right To Buy was introduced (by the Thatcher government around the time of the Falklands War).

Another shot across the bows of the big developers is Labour’s insistence that a huge percentage of new builds are affordable and/or social housing.

Not only has Labour given local councils autonomy over the decisions for local housing needs, Autumn Budget announces measures to help fund their endeavours.

Not only will Right To Buy discounts be cut, but local councils will keep all the proceeds from the sale of council houses.

This is a huge step towards addressing the years of neglect but, as Reeves recognised, it won’t all be accomplished over one term of government.

Another manifesto pledge met

In their 2024 election manifesto, Labour committed to building homes around Liverpool docks.

In the budget yesterday, the chancellor confirmed funds will be made available for 2,000 homes in the area, plus funding for new homes in Cambridge.

The early impact of Autumn Budget on mortgage interest rates

As news of the budget’s contents continually leaked out yesterday before Reeves had even got to her feet, this “supreme discourtesy” which the Chairman of Ways and Means condemned before any official announcements were even uttered, the global market reacted.

In particular, British borrowing costs rose around the world. And just this morning, swap rates, upon which lenders have been basing their mortgage rates for months, increased as well.

Worry, struggle, and pain

If you include the potential for war and supply chain interruption around the world, my worry is that the recent low mortgage rates we’ve seen will fall into jeopardy.

We already know that first-time buyers will be paying more Stamp Duty next year. If the UK’s borrowing costs rise, I struggle to see how the Bank of England will be able to implement further expected interest rate cuts.

The knock-on effect, with swap rates rising, too, is that all lenders will be borrowing at higher rates. We know they’re working on ultra-thin margins already. Their only solution will be to pass the increments on to their mortgage customers. Ouch.

Final thought

If I were either a first-time buyer or considering a remortgage, I wouldn’t hang about to see which way the wind blows. If we get another Beast from the East, it might mean a cold front for everyone -- right down to the bottom of all of our pockets.