What the Autumn Statement 2023 means for the housing market

This year’s Autumn Statement was not far from what most of us were expecting. Despite recent rumours, stamp duty has not taken any cuts. However, it was announced that the mortgage guarantee scheme will be extended. This scheme was launched in 2021 and its purpose was to incentivise lenders to offer a higher loan-to-value (LTV) value of 95% to buyers placing a deposit of 5%.

In a nutshell:

• The Mortgage Guarantee Scheme is now extended until June 2025.
• £110 million will be invested in developing new homes this year.
• Using this money, 40,000 new properties will be built next year.
• Local Housing Allowance Funds have been unfrozen, giving 1.6 million households approximately £800 of support for rental costs in 2024.

This year’s Autumn Statement was not far from what most of us were expecting.

Despite recent rumours, stamp duty has not taken any cuts. However, it was announced that the mortgage guarantee scheme will be extended. This scheme was launched in 2021 and its purpose was to incentivise lenders to offer a higher loan-to-value (LTV) value of 95% to buyers placing a deposit of 5%.

The government supports any mortgages issued by this scheme. This means that they must step in and cover some of the cost if the buyer fails to pay off the mortgage.

Although the scheme was originally scheduled to end in December 2023, it has now been announced that it will continue until the end of June 2025. This way, potential buyers with smaller deposits can get the help they need to buy a home.

What experts are saying:

Executive Director at Zoopla, Richard Donnell, claims, “First-time buyers continue to be a key engine for the housing market – however, they have to rely on the Bank of Mum and Dad.”

Donnell goes on to explain, "Although first-time buyers get a lot of support through stamp duty relief, the big hurdles remain having the income needed to afford a mortgage alongside raising a deposit. 

“Extending the mortgage guarantee will help some buyers struggling to borrow for their first property.”

The mortgage guarantee scheme has benefitted 37,800 households over the last two years, and 86% of these households are first-time buyers, meaning that roughly 5% of first-time buyers have benefitted from this scheme between April 2021 and May 2023.

However, the Help to Buy equity loan scheme was arguably more helpful. This scheme helped 387,200 buyers, 85% of whom were first-time buyers, in the last decade. With the help of this scheme, approximately 10% of first-time buyers have been able to get a mortgage.

"With this in mind, the key to the extension of the Mortgage Guarantee Scheme will be improving its affordability and appeal," concludes Donnell.

Changes made to National Living Wage and National Insurance:

Another part of the Chancellor’s strategy was to increase household income to ultimately make housing more affordable to the masses.

Therefore, the National Living Wage has been increased. This accompanied a reduction in National Insurance for both traditionally employed and self-employed individual.

This is good news for many people during the worrying cost-of-living crisis. Such pressures have impacted first-time buyers and anyone looking to move house, causing property transaction rates to plummet.

Inflation set to decrease by 2% by 2025:

While improving affordability is one of the main ways of tackling the housing crisis, it doesn’t stop there. The Bank of England predicts that inflation will fall to its target by mid-2025. This means that, during 2024, mortgage rates may decrease more quickly than anticipated, which would be good news for house sales as we would begin to see an increase.

Donnell says, “The most important focus for the Government should be deploying policies that help support the reduction in borrowing costs for all buyer groups.”

“This needs to be supported by boosting housing supply through new house building and more support for affordable housing schemes to help those on all incomes.”

£110m to boost new homes supply:

The chancellor has promised to invest more than £110 million in the development of new homes this year. He has also promised to build 40,000 new homes next year.

In addition to this, £32 million will be invested to ‘bust the planning backlog’. New houses are also on the cards for several cities, including Cambridge, Leeds, and London.

First-time buyers will be pleased to hear that the changes don’t stop here. £450 million is set to be allocated to the Local Authority Housing Fund with the goal of producing around 2,400 new homes.

New laws surrounding house-to-flat conversions may soon be introduced, with permissions allowing any home to be converted into two flats. However, this would only be allowed provided that the exterior of the home remains unaffected. Please note that this is still in discussion and is not yet confirmed.

Local Housing Allowance rate:

There is good news for renters, too. The Local Housing Allowance rate is set to increase. This rate dictates how much help renters get when renting from a private landlord, and it has been frozen since 2020.

This increase should give approximately £800 of support to 1.6 million households, helping many families across the UK deal with rising rent costs.