The Budget 2024 Reaction – Mortgage Rates to Rise?

The Budget 2024 was something we seemed to wait an age for, much of its content was given away beforehand, but agree or not with the content, it was refreshing to see the first female Chancellor ever deliver a budget in an assured, professional style.

Within minutes of her sitting down, however, press releases and comments were saying both she went too far, or not far enough, from saying that there could be a brain drain of talent leaving these shores in search of sunnier climes, to those that say an opportunity was missed to make real change.

The usual economic data reflected a subdued economic outlook, and with the budget 2024 delivering a massive £40 billion worth of tax hikes, (you can argue whether they did or did not technically breach Labour’s promises), increases to employers’ National Insurance will hurt, and a jump in the minimum wage amounts will both help many workers and hurt many smaller businesses in equal measure.

Capital Gains Tax will go up, from 10% to 18% for basic rate taxpayers, and 20% to 24% for those who pay at the higher rate. This will match the existing rates for property which importantly stay the same.

Of course, there are a wide range of other measures that other places will analyse further, but what does this all mean for mortgage rates and property prices?

Inflation and Interest Rates

The biggest worry in the first couple of days following the budget 2024, was that this had the potential to be another Mini budget, as initially we saw a spike in gilt yields and therefore SWAP rates. Lenders played a nervous wait and see game before some had to act, replacing new lower rates with higher ones.

The good news is that, despite a worried moment for the Chancellor, things seemed to have settled, albeit at a higher level. It is nothing like the mini-budget shock.

The issue, however, is that the Office for Budget Responsibility feels that overall, this Budget’s policy measures increase inflation by 0.4% at their peak effect in 2026 and will increase interest rates and gilt rates by 0.25%.

Early feedback from mortgage lenders is that they believe this will settle down, though markets now believe that although a Bank of England Base Rate cut is still on the cards for November, the pace of change thereafter will be much slower than initially predicted, with a potential Bank Base Rate of 4% to 4.5% by the end of next year.

Of course, we never take anything for granted as playing the markets is a dangerous game, but it is a fact that with SWAPs increasing in the short-term, mortgage rates have now also increased.

All eyes are back on the Bank of England for their next move, and on lenders to see just how much competitive pressures will offset these moves.

Housing and Stamp Duty

The Budget 2024 key headlines for the property market were two-fold, the announced and the unannounced.

The big “shock” was the announcement that the Stamp Duty surcharge for those who own two or more properties, second-homes, landlords and holiday lets for example, will be increased by 2% to 5% from the very day after the budget. Yes, it is already in place!

This immediately put a whole lot of housing chains in potential jeopardy, and we have already heard of some deals stalling. I suspect we will see a whole lot of renegotiation going on of prices to keep deals alive. For someone purchasing at £350,000 where they will have more than one property the stamp duty bill will rise by £7,000 from £15,500 to £22,500. The difference on larger properties will be substantial.

This is a hammer blow to many prospective BTL landlords, and despite doing nothing to quell some of the selling we are seeing from amateur landlords, in truth this industry is a robust one.

I suspect that after the initial wailing and gnashing of teeth, the new landscape will settle although the Government need to heed warnings and not continue to bash landlords and reduce too far the amount of rental stock. The Private Rental Sector is essential to the health of the housing market and needs to be balanced with both residential and social housing.

The unannounced part of all this is the fact that in April next year, only a few months away, the temporary increase to the threshold at which people start paying Stamp Duty, will stop at the end of March.

This will see the current 0% limit for First Time Buyers reduced back down from £425,000 to £300,000, as well as the nil rate band for all others reduce from £250,000 back to £125,000.

This could lead to a rush on property in the first quarter of the year reminiscent of a stamp duty holiday end, as buyers rush to get in before the changes.

This time, everyone will be ready for it and we are already sensing that buyers are keen to take advantage before then.

Best Mortgage Rates

 There are, however, still a plethora of decent mortgage products available, with much more choice for those with smaller deposits, or those relying on the help of family.

Innovation is rife in the industry so whether you are self-employed, on a contract, have had a credit blip or looking to borrow over £1m or a mortgage into retirement there are products for you.

In terms of mortgage rates, for standard residential mortgages, borrowers can obtain 2-year fixes at 3.84% (7.00% APRC) and 5-year fixes from 3.75%, (6.10% APRC), whilst variable discounted rates are around from 4.64%, (6.40% APRC) and variable tracker rates from 5.08% (8.10%).

Those looking at Buy-To-Let can now obtain products from 3.24% (8.10% APRC) for a 2-Year fixed, 5.27%, (7.70% APRC) for a 2-year tracker or 5-year fixes are available from 3.58% (4.00% APRC).

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