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Budget 2024 reaction: first-time buyers are biggest losers

Last Updated: 06-11-2024

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    My first reaction to Rachel Reeves’ budget was disappointment. The few elements within it that concerned mortgages and housing inspired zero confidence. But it was also what Reeves didn’t mention that was disheartening for the mortgage industry.

    Now that I come to write the main points down, frustration guides my hand. The budget was a real opportunity to signal Labour’s intent in addressing the housing problems it inherited. Me, and many of my peers, not only think the opportunity sailed by, but that the measures announced could derail Labour’s housing development plans in the long term.

    First-time buyers

    Any commercial market needs new blood. For the mortgage and housing markets, that new blood comes from first-time buyers.

    Of all the sectors, it seems to me as if first-time buyers have been hit the hardest by the budget. Here’s why:

    Stamp Duty

    The headline for Stamp Duty was that people buying a second home/investment property would see their Stamp Duty rise. On top of Labour recently giving local councils the autonomy to double landlords’ council tax bill, this is a blow.

    It will especially irk our contractor clients who use buy-to-let as a second income/pension top-up. And with the pension changes announced, they’ll need their investment properties all the more.

    But I digress. Again, it was what wasn’t said that got my goat.

    Frozen out

    new home off limits concept

    I was really hoping for Labour to extend the current freeze first-time buyers enjoy on Stamp Duty. They didn’t.

    Now, first-time buyers will have to pay the same Stamp Duty as everyone else. And let’s get into the context of all these things thrown in a pot altogether.

    Landlords aren’t going to suffer all these costs. They can’t. Much of the extra they’ll have to fork out they’ll pass on to their tenants. And who are those tenants?

    The majority (though not all) private tenants will be the younger generation, struggling to save a deposit to get onto the property ladder. If they’ve got to find more rent and face higher SDLT, how are they going to save for their deposit?

    Affordable housing

    Okay. So Reeves did follow up on her manifesto pledges to kickstart new builds. But there are caveats to that, too.

    Reeves placed Deputy PM Angela Rayner in charge of the first £500m (of £3.1bn) home-building investment from this budget. But Rayner only has so much control over that.

    As well as devolving council tax judgements to local councils, Labour is relying on local mayors to decide what homes their wards need. One would hope that mayors in regions where there’s little affordable housing will jump to first-time buyers’ rescues.

    But, will they? We can live in hope.

    Smaller developers

    One chink of light was that Reeves announced £3bn for smaller developers. This, along with time constraints on licenses for developers to start building, should kickstart construction.

    But what are these developers going to be thinking?

    “Should I be building homes for first-time buyers, who are less likely to be able to afford them?
    Or for home-movers and second-steppers, who have equity behind them?”

    If you’re a small developer, you need to be able to sell the property you’re building. You and I can see their dilemma; why can’t the government?

    I just hope that the lines of communication remain open between central and local government. That’s crucial to delivering the affordable homes this country needs.

    Talking of communication, here’s my deeper dive into what the changes to Stamp Duty mean for homeowners. Whether you’re a resident, first-time buyer or landlord, you really do need to get your head around these changes.

    Author: John Yerou

    John Yerou is the owner and founder of the award-winning Mortgage Quest Ltd and its subsidiary brands.

    In 2004, John began his career in financial services as an independent mortgage advisor and broker. He's since been instrumental in negotiating bespoke mortgage underwriting criteria for professional contractors with many high street lenders.

    As such, John's one of the most respected and recognisable names in securing mortgages for the UK's flexible workforce, incorporating independent professionals and the self-employed.

    His recognition as the go-to mortgage expert has grown exponentially, reflected in citations and his own publications in both national and contractor-oriented press.

    Posted by John Yerou

    on November 4th, 2024 15:29pm in Latest mortgage news & opinions.