"The upcoming Budget has presented a real bump in the road, knocking consumer confidence and stifling the positive momentum we have seen. "
- John Phillips, CEO of Just Mortgages and Spicerhaart
Chancellor Rachel Reeves is set to deliver her inaugural Budget on Wednesday, October 30th, and significant changes are expected. So, what should various stakeholders in the housing market prepare for?
In the lead-up to Labour's first Budget since coming to power, there has been widespread speculation about potential increases in capital gains tax (CGT), which could significantly affect buy-to-let landlords and property investors.
At the same time, one of Labour's key election promises was the introduction of the Freedom to Buy scheme, aimed at helping first-time buyers. Many are now wondering if this initiative will finally take shape in the upcoming Budget.
Stamp duty adjustments
One of the most pressing issues on the table is the potential for changes to stamp duty. Currently, first-time buyers are exempt from stamp duty on properties priced up to £425,000, a threshold that was temporarily increased from £300,000 in the 2022 mini-budget. However, this is set to revert to £300,000 in April 2025. For those moving homes, stamp duty applies from £250,000 but is also scheduled to revert to £125,000 next year.
With a new government in place, many wonder if these tax thresholds could be frozen. John Phillips, CEO of Just Mortgages and Spicerhaart, said: “The upcoming Budget has presented a real bump in the road, knocking consumer confidence and stifling the positive momentum we have seen. We have to hope the anticipation is the worse than the reality, although we have already seen uncertainty in the markets surrounding potential tax rises and the changing of debt rules to increase public borrowing. Add to this the U.S. election or any further action in the Middle East and it remains to be seen how markets react.
“With a spotlight on housing, the Chancellor cannot look at increasing supply and new housebuilding targets and say job done. While important, we also need the relevant support to remove the barriers and increase the routes to homeownership – particularly for first-time buyers who are so integral to the entire market. Extending stamp duty relief past next April, or making it permanent would be a hugely positive move, not just to unlock first-timers, but those looking to downsize from larger properties.”
Home moving experts are hopeful that adjustments could stimulate demand. If the threshold is lowered or the rates increased, it could create additional barriers for first-time buyers and those looking to downsize.
Simon Webb, managing director of capital markets and finance at LiveMore, commented: “There are rumours the government may introduce a freeze on Stamp Duty Land Tax (SDLT) for homeowners aged 65 and over who are looking to downsize. Such a measure would be a welcome relief, as it would address a key financial barrier that often prevents older homeowners from moving into more manageable properties. Many individuals in this age group are interested in downsizing but are deterred by the costs tied to SDLT.
“If this freeze does come through, it could significantly improve housing market fluidity by freeing up larger homes for younger families, enhancing housing availability across age groups. For older borrowers, a reduced SDLT burden combined with the range of products now available would help them unlock home equity.”
Freedom to Buy: will there be more help for first-time buyers?
Another key topic is the Labour party’s election manifesto promise to introduce the Freedom to Buy scheme for first-time buyers. This initiative aims to enhance access to low-deposit mortgages, building on the existing Mortgage Guarantee Scheme. However, as of now, few details have been released about how this will work.
Nick Hale, CEO of Movera, said: “We hope the Budget will flesh this out and provide more information on how the Freedom to Buy scheme will work.” There are also hopes that the Chancellor will improve the Lifetime ISA (LISA) scheme, which currently allows first-time buyers to save up to £4,000 a year, tax-free, with a 25% government bonus. However, the outdated penalty for withdrawals has been a sticking point.
As Nick Hale points out, “By removing the 6.25% withdrawal fine for home purchases above the current £450,000 limit—set since 2017—more individuals would feel encouraged to save into the scheme. Londoners are denied access to the scheme with the average house price now reaching £520,000.”
Capital Gains Tax (CGT): will it be increased?
Speculation around CGT has been rampant in the lead-up to the Budget, with many anticipating an increase that would affect buy-to-let landlords and investors. If CGT were to rise, it could have significant implications for the rental market, as many landlords have already begun selling properties in anticipation of such changes.
Heather Hancock, head of credit and operations at Black & White Bridging, commented: “The potential changes to Capital Gains Tax (CGT) could have a significant impact on the buy-to-let sector, which is already facing challenges. With the proposed reduction of the annual exempt amount and potential increases in CGT rates, small buy-to-let landlords could be further discouraged from investing in property. This comes at a time when many are already struggling due to soaring mortgage rates and shifting regulations, making it increasingly difficult to expand their portfolios.”
Investment in affordable housing
As the housing crisis continues, increased investment in affordable housing is paramount. Home moving experts emphasise the need for more government funding for social housing and initiatives to revitalise urban areas. This focus on affordability could create jobs, stimulate local economies, and provide much-needed housing options for those struggling to find suitable accommodation.
Matt Harrison, commercial director at finova Payment Mortgage Services commented: “Falling interest rates are providing Labour with the shot in the arm the housing market needs, creating a more predictable environment and stabilising spending. The Budget must build on this momentum, following through on its promises to boost house building. Incentives for developers, along with simplified planning processes, would help tackle the ongoing supply issue and ease the strain on buyers."
As the country eagerly awaits the Budget announcement, it represents a key moment in determining the direction of Labour’s housing policies and their impact on the sector. By prioritising these crucial areas, the government can help ensure that homeownership remains within reach for many, facilitating a smoother and more supportive environment for home moving in the UK.
