HOUSE prices have risen despite fears of a property tax overhaul in the Chancellor’s budget next month.
New figures from Nationwide show property values lifted 2.4% on an annual basis, taking the average UK house price to £272,226 in October.
On a monthly basis UK house prices rose by 0.3%, which marked a slower pace of growth than September’s 0.5% monthly increase.
But experts say those looking to buy a new home are taking a “wait-and-see” approach to see what the state of their finances will be after next month’s budget – as rumours are swirling over property tax changes.
Elliott Jordan-Doak, a senior UK economist at Pantheon Macroeconomics, said house prices are likely to continue rising slowly over the coming months.
He said: “We think that some homebuyers are taking a wait-and-see approach to the budget, which is weighing slightly on sentiment in the market.”
Robert Gardner, Nationwide’s chief economist, added the market has remained resilient, “especially since mortgage rates are more than double the level they were before Covid struck and house prices are close to all-time highs”, he said.
He said conditions should help support the property market over the months ahead.
Mr Gardner said: “Housing affordability is likely to improve modestly if income growth continues to outpace house price growth as we expect.
“Borrowing costs are also likely to moderate a little further if bank rate is lowered again in the coming quarters.”
What YOU need to do now
For anyone buying, it’s a gamble on whether to wait based on what Rachel Reeves announces on November 26.
While house prices could continue to rise, agreeing a deal now may be tempting.
But buyers should also keep in mind that interest rates are expected to drop below 4% next week, marking the first time since January 2023.
The Bank of England’s (BoE) Monetary Policy Committee (MPC) voted to keep the base rate steady at 4% last month, but analysts at Goldman Sachs expect a cut to 3.75% on Thursday, November 6.
Cutting the base rate makes borrowing cheaper, and could spell good news for homeowners.
This is because a cut in the base rate typically leads to lower mortgage rates.
For homeowners already with a mortgage and looking to move house, a sensible idea could be to lock in a new deal now. That’s because you can lock in a new deal six months before your current deal ends.
Major lenders including Santander, NatWest, Barclays and HSBC have all cut their rates in the past week, sparking a mortgage price war.
Even if mortgage rates fall even further, you can always cancel your deal and lock into a new one.
Jack Tutton, director at Fareham-based SJ Mortgages, said borrowers should act now ahead of the Budget on November 26.
“Lenders are ramping up the rate war ahead of the budget to gain market share before the Chancellor makes her announcements.”
“All of which is great news for homeowners whose mortgage deal is coming to an end in the next six months.
“As it’s been for a while, it’s still best to secure a new deal at your earliest opportunity providing the lender will consider changing your product should the market improve.”
Help for first time buyers
The market for first-time buyers remains tough with wage stagnation and economic turmoil making affordability out of reach for many.
A number of lenders have launched 5% mortgage deposit deals to help ease the burden of securing a deposit.
This year, Nationwide just recently launched a 95% mortgage for buyers looking to purchase a new build home.
The offer also allows customers to borrow six times their annual income through its Helping Hand scheme.
Elsewhere, Skipton Building Society offers a 100% mortgage deal that allows you to buy a home without a deposit.
A similar mortgage deal was launched by April Mortgages too.
Small deposit mortgage deals were previously popular leading up to the 2008 financial crash but were phased out afterwards.
These products have been hailed as an accessible way for buyers to get on the ladder.
But the larger loan-to-value ratio for the mortgage means buyers will pay higher interest rates when they make repayments.
It’s also important to be aware of negative equity in case house prices fall, meaning you owe more than what your home is worth.
This could make it very difficult, and even impossible to sell.
Prospective first time buyers can also take advantage of a number of schemes such as the Help to Buy Isa.
This is a tax-free savings account where for every £200 you save, the Government will add an extra £50.
How the Autumn Budget could impact the UK property market
The latest update on the state of Britain’s housing market comes just weeks ahead of the Autumn Budget.
The Chancellor is thought to be plotting a potential overhaul of property taxes, including a new mansion tax.
Under these proposals owners of homes worth £2million and above would face a charge of 1% on anything over that amount, according to reports in The Mail.
Elsewhere, the Chancellor is said to be considering a new tax on home sales, which would replace stamp duty.
The proposals suggest that sellers, rather than buyers, would be responsible for paying the tax on properties sold.
Stamp duty land tax (SDLT) is a lump sum payment you have to make when purchasing property over a certain threshold.
The amount you pay depends on whether you’re a first-time buyer or moving to a new home.
Under these proposals, first-time buyers purchasing homes under £300,000 wouldn’t save anything, as they already pay no stamp duty.
However, those buying more expensive homes would benefit the most.
Plus, homeowners with expensive properties could also be hit with capital gains tax when they decide to move house.
Rachel Reeves is said to be considering ending private residence relief, which stops people from having to pay capital gains tax when they sell their main home.
This would mean that properties worth over a certain amount would be subject to the tax.
What help is there for first-time buyers?
GETTING on the property ladder can feel like a daunting task but there are schemes out there to help first-time buyers have their own home.
Help to Buy Isa – It’s a tax-free savings account where for every £200 you save, the Government will add an extra £50. But there’s a maximum limit of £3,000 which is paid to your solicitor when you move. These accounts have now closed to new applicants but those who already hold one have until November 2029 to use it.
Lifetime Isa – This is another Government scheme that gives anyone aged 18 to 39 the chance to save tax-free and get a bonus of up to £32,000 towards their first home. You can save up to £4,000 a year and the Government will add 25% on top.
Shared ownership – Co-owning with a housing association means you can buy a part of the property and pay rent on the remaining amount. You can buy anything from 25% to 75% of the property but you’re restricted to specific ones.
Mortgage guarantee scheme – The scheme is available to those with a 5% deposit, with the government providing a guarantee to the lender to cover some losses if the buyer cannot repay their mortgage. It’s eligible for homes up to £600,000.