How chancellor Hunt’s Autumn Statement 2023 should today help housing, mortgages and buy-to-let

Jeremy Hunt’s Autumn Statement 2023 is imminent, with more than ‘just’ the economy on the line for the government.

There are plenty of rumours about its content, and predictions about his measures -- some of which the chancellor may float yet hold back from unleashing until the pre-election Spring Budget 2024.

But we’re Freelancer Financials, so here's my take on today’s potential announcements which could affect the housing and mortgage markets. And also, a consideration of how some of the anticipated measures could (hopefully) help alleviate the cost-of-living and social housing crises, writes John Yerou, CEO of Freelancer Financials.

In-flay-shun! (Stand at ease, men)

Prime minister Rishi Sunak is claiming 'victory' over inflation now that it's dropped to 4.6%. But let's not get blindsided by (his) headlines!

● Inflation is still 230% above target.

● It was predominantly the lowering of the energy firms' price cap that was the catalyst for bringing it below 5%.

● The cost-of-living crisis is still very much with us, and will be for years, such is the damage wrought by inflation over the last 12-14 months.

So, what does the bitter-sweet inflation rate mean for today’s Autumn Statement 2023?

Well, that’s a tricky question to answer, what with the rumour mill being in overdrive!

Certainly, we can say with some confidence that keeping inflation in check will today be a high priority for Mr Hunt.

But the less preoccupied by inflation he is; the more likely it seems that some of the rumours doing the rounds – listed below – will be proven to have had a grain of truth to them:

1. Tax cuts
2. Business tax reliefs
3. Inheritance tax reform
4. Pensions reform
5. ISA/LISA regime changes
6. Stamp duty cuts

My take on these six? Well, I'd be surprised if the chancellor made cuts to personal taxes for fear of fuelling a rise in inflation. It’s more likely he'll save any such cuts for Spring Budget 2024, to bolster his boss’s popularity, and boost the Conservatives’ chances of electoral success.

However, cuts to IHT and stamp duty are considered to have less of an impact on inflation. These two could therefore be considered ‘fair game’ this afternoon.

But, what about the areas contractors come to us in relation to -- the mortgage and housing markets?

Assistance for first-time buyers: Mortgage Guarantee Scheme

Hunt is under pressure to introduce a package of support for first-time buyers. The envisioned package includes an extension to the government’s Mortgage Guarantee Scheme.

The MGS was introduced in spring 2021. Its purpose is to allow first-time borrowers access to mortgages on properties worth up to £600,000, with only a 5% deposit required.

The scheme was due to end in December 2023, so it is likely today to get extended for another year.

But as well as helping first-time buyers, the MGS also helps lenders offer 5% deposit mortgages. That's because the government underwrites the risk attached to such low-deposit borrowing for those lenders enrolled. Seemingly, a win-win!

Stamp Duty Land Tax

We know that Stamp Duty (SDLT) is a huge consideration for people buying a home. We also know from experience that stamp duty ‘holidays’ (theoretically) work. To my calculations, that gives the chancellor three options when he gets to his feet:

1. Reduce existing rates;
2. Increase the thresholds at which buyers become liable for stamp duty; or
3. Introduce a new SDLT holiday.

Either one is an easy-win. And the opportunity to please everyone may be too tempting for Hunt to resist.

There are even whispers of a stamp duty rebate being under consideration. The rebate would be payable to homeowners who make energy efficiency improvements within two years of buying their property. But some property experts claim the government has now ruled this out. So much for our ‘green’ targets, then.

What should a bold chancellor do to help the housing market?

The government has utterly failed to address the need for social and affordable housing. Even promises to reform planning laws to encourage more affordable housing haven't worked. In light of this, Mr Hunt should take this opportunity to be bold and abolish stamp duty for first-time buyers.

It's not just first-time buyers who feel the pinch of SDLT.

Homeowners whose family has grown up and flown the nest find themselves with way more space than they need. The problem is; those parents aren't selling their family home because it costs too much to sell/move. If the government introduced lower stamp duty for those aged 55 and over, it would mitigate at least some of that cost.

Buy-to-Let’s Section 24 -- please remove, chancellor

Many contractors supplement their income/pension with buy-to-let investments. They'll know how hard it's been since the government rolled out restrictions on tax relief on buy-to-let mortgages in 2017.

This controversial tax change is known as Section 24. I'd love to see this government abolish S24, as it’s crippling the landlord and rental market.

Under Section 24, HMRC now taxes every penny of rental income. Yes, landlords can claim their mortgage interest back. But they can only claim up to 20% (basic income tax).

If you consider today’s interest rates, they’re substantially higher than in April 2020. This is forcing many landlords to sell, which is reducing the number of properties for tenants to rent.

Raising rent's profound impact on the social housing and cost-of-living crises

Landlords who haven’t sold have had to raise their own tenants' rent to cover multiple elements raising their costs. Even our well-heeled chancellor isn’t oblivious to this. He himself raised the rent on his luxury apartment by a hefty 18% last summer!

The measures taken by landlords since Section 24 came into effect are driving up the price of private rent. This is only adding to the rise in inflation and prolonging the cost-of-living crisis.

Unfortunately, this regulation has also worsened the housing crisis, given that there's even less social housing to make up for the shortfall in rental properties. The tenants affected are feeling the pinch in every aspect of their daily lives.

The acid test is almost here

How can tenants save for a deposit when rent is gobbling up so much more of their disposable income? Or maybe a merry-go-round of perpetual renters is what Mr Hunt and his horde of portfolio-owning peers want. The acid test will show in just a few hours where the government's intent truly lies.

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