UK Chancellor Rachel Reeves has presented Labour’s first Budget in 14 years, introducing some of the most substantial tax measures in recent history, with £40bn in tax increases alongside shifts in spending and new debt targets.

Her call to “invest, invest, invest” sets the groundwork for change. At Larkbridge Mortgages, we offer insights into how this Autumn Budget may influence the UK mortgage and housing market through 2024 and into 2025, and what it could mean for your mortgage and financial planning.

Inheritance Tax

The Chancellor extended the freeze on inheritance tax thresholds until 2030, but a major shift is coming: inherited pensions will now be subject to Inheritance Tax from April 2027. This could lead individuals to access these funds earlier to support wealth transfer, potentially benefiting from taper relief. Coupled with recent changes to stamp duty, we expect that the “bank of mum and dad” will continue playing a vital role in assisting younger generations in purchasing property, especially after the current temporary stamp duty reliefs end in March 2025.

Employers’ National Insurance Contributions (NICs)

Starting April 2025, Employer’s NICs will increase from 13.8% to 15%, and the Secondary Class 1 NIC threshold will decrease from £9,100 to £5,000. This will significantly raise employer costs, potentially impacting employee benefits and bonuses, which could influence disposable income and, by extension, mortgage affordability.

These NIC changes, along with recent employment legislation, may shape hiring decisions and workforce planning, suggesting the government’s broader aims to increase labour supply. Although steady mortgage rates are forecast through 2025, NIC changes could restrict wage growth, slowing house price and transaction volume growth in response.

Stamp Duty Land Tax (SDLT)

SDLT Surcharge Increase

From 31st October, the surcharge on SDLT for corporate property purchases and second homes will rise from 3% to 5%. This move may shift investor interest away from buy-to-let properties and toward commercial property, which is becoming more appealing.

Those considering let-to-buy mortgages may need to reassess their plans, particularly if budget constraints are tight. The change could extend transaction timelines, as investors reconsider deals, potentially leading to longer property chains or dropped agreements.

End of Temporary SDLT Relief in March 2025

Currently, first-time buyers (FTBs) benefit from SDLT relief on homes valued up to £425,000 in England and Northern Ireland, with partial relief up to £625,000. The government intends to reset these thresholds to pre-2022 levels by April 2025, which could mean that around 20% more FTBs will face stamp duty costs.

In 2024, FTBs represented 36% of the market, and this change might dampen some buyers’ enthusiasm, especially in higher-cost areas. Some may try to negotiate lower prices to offset these new costs, though other buyers may be willing to proceed at current prices.

Housing Investment

The government has committed £5bn to expand affordable housing, including £3.1bn for the Affordable Homes Programme and £3bn to support SMEs and the Build to Rent sector. These investments aim to boost housing availability, providing more affordable, high-quality options, particularly for first-time buyers.

Looking Ahead

While the Budget reflects broad changes, the full impact on the UK mortgage and housing market may unfold over time.

The Office for Budget Responsibility (OBR) has increased its inflation forecast, expecting an average of 2.6% in 2025 and a gradual decline to 2% by 2029. This suggests that interest rates may remain higher for longer than previously anticipated. Rising gilt costs, as gilt prices have fallen, could further impact borrowing costs.

Intensified competition among lenders has helped bring average mortgage rates to a two-year low, according to Zoopla. Recent positive inflation data has also driven market activity. The Bank of England reported a two-year high in mortgage approvals in September, with Rightmove noting increased inquiries and agreed sales, up 29% from last year. However, Rightmove also reported a muted autumn price increase as buyer choice reached its highest since 2014.

These developments could influence mortgage affordability, market activity, and house prices as the Budget’s impact on wage growth becomes clear.

How Larkbridge Mortgages Can Help

The recent Budget brings key changes that may affect your mortgage strategy. Acting sooner rather than later could benefit you. Our Larkbridge Mortgages advisers are available to discuss how the Budget may influence your plans.

To connect with our team, call 01284 729250 or email admin@larkbridge.co.uk, or book an appointment at a convenient time via our website, www.larkbridge.co.uk.