How Spring Statement 2025 may affect homebuyers and homeowners

The mortgage and property markets are not expecting any Spring Statement 2025 announcements that would give homeowners and homebuyers cause to celebrate.

Despite my own hopes, it does seem unlikely that chancellor Rachel Reeves will unveil any drastic changes this Wednesday for contractor mortgage holders and hopefuls, writes John Yerou, CEO of Freelancer Financials.

Not great fiscal mood music for Reeves’ entrance

We expect the updated economic outlook from the Office for Budget Responsibility (OBR) to be grim.

There’s a real fear of stagnation and increasing inflation.

On top of these two, we have the spectre of rising UK defence costs.

Interest rates just got held at 4.5%, unsurprisingly

With all these threatening to strain the public purse, it’s no wonder that the Bank of England (BoE) voted (on Thursday) to hold UK interest rates at 4.5%, by an almost unanimous 8-to-1.

On a positive note, the rates on two-year and five-year fixed-rate mortgages have reduced substantially from their peaks.

Lenders continuing to reduce their margins to remain competitive is the driver, here.

A boon for contractors seeking fixed-rate mortgages, but…

And while this is good news if you’re a contractor in the market for a fixed-rate mortgage, the BoE is unlikely to cut the base rate further until inflation is under control.

Here’s what could be on the cards at Wednesday’s Spring Statement 2025 for homebuyers and homeowners.

If you don’t see these measures, all is not lost – they may be unveiled later in 2025.

Three housing measures at Spring Statement 2025 for contractors to look out for:

1. Update on Stamp Duty (SDLT) for first-time buyers

Stamp Duty Land Tax (SDLT) applies to property or land purchases exceeding a minimum threshold in England and Northern Ireland.

In September 2022, the government increased these thresholds to boost the housing market.

First-time buyers saw the SDLT threshold rise from £300,000 to £450,000, while for other homebuyers, the threshold increased from £125,000 to £250,000.

These increases led to significant tax savings, or even full exemptions for many buyers, especially first-time buyers.

Autumn Budget’s silence on SDLT thresholds

Missing in October’s Autumn Budget 2024 was any plan to extend the current freeze on Stamp Duty for first-time property buyers.

So, could Reeves address stamp duty rates in Spring Statement? If the chancellor doesn’t, these increased SDLT thresholds will revert to their pre-2022 levels on April 6th 2025.

This means first-time buyers would then pay SDLT at the same rates as everyone else.

In spite of rumours of a last-minute reversal, there seems little willingness by the government to keep the higher, favourable stamp duty thresholds. The government’s main priority is to plug the £22 billion budget deficit, to which stamp duty is an important contributor.

Some forecasters predict that this may lead to property prices dropping as a consequence of demand falling. We’ll just have to wait and see.

2. Mortgage lending rules could relax to boost homeownership

Mortgage lending and affordability criteria could relax as a result of meetings we know have been held between the chancellor and the financial regulator, the FCA.

The aim of the face-to-face was to come up with ways to help more people into homeownership by loosening restrictive mortgage lending rules.

Should Reeves act this week, the chancellor would be supporting more first-time buyers with access to the housing market.

Skipton and other lenders have beaten Reeves and FCA to it

But regardless of whatever the chancellor with input from the FCA might be planning to spring at Spring Statement 2025, some mortgage providers have taken the initiative themselves.

Lenders, such as Skipton Building Society, have started providing higher loan-to-income multiples and 100% mortgages. They’ve made this possible by widening affordability criteria to take into account applicants’ current rental payments, rather than income alone.

The chancellor would love to take the credit for these lenders’ innovative and common sense approaches to new mortgage products, underwriting and lending.

The truth is it’s more a case of lenders having nowhere left to go with their margins, so they have had to get more creative to entice homebuyers.

To what extent might a mortgage lending relaxation come from the Reeves-FCA collab?

Positively, the government and the Financial Conduct Authority have realised that too much regulation can damage consumer outcomes, rather than support them.

It’s therefore been established by regulator and administration that such regulation undermines the growth that is at the very heart of Labour’s economics policies.

The mortgage market is a case in point.

3. Could Spring Statement 2025 revive ‘self-cert’ mortgages?

And so you never know -- we might even see the return of the ‘self-cert’ mortgage or a new variant.

In 2009, the FCA (then the FSA) banned self-certification following the credit crisis in 2008. Reinstating them now would be an extreme measure, indeed.

The chancellor will probably be nervous about making any announcement on this. It has the potential for kickbacks from bond markets, if what happened to Liz Truss and Kwasi Kwarteng in 2022 is a yardstick. And that’s one stick she won’t want to give the opposition to beat her with, politically.