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What the Autumn Statement 2023 means for the housing market

There were no huge surprises for the housing market in the Autumn Statement. The Mortgage Guarantee Scheme extended until end of June 2025. £110 million to be invested in new home developments this year and next to build 40,000 new properties. The freeze on Local Housing Allowance Funds is removed, giving 1.6 million households an average of £800 of support for their rental costs next year.

1. Stamp Duty Cut Rumours Unfulfilled:
• Contrary to rumours, there was no stamp duty cut announced to stimulate the housing market.

2. Extension of Mortgage Guarantee Scheme:
• The existing mortgage guarantee scheme, introduced in 2021 to encourage 95% loan-to-value mortgages, will be extended.
• The scheme, supporting buyers with a 5% deposit, will now run until June 2025.
• Mortgages under the scheme are backed by the government, providing coverage if the buyer defaults.
• The extension aims to assist prospective borrowers with smaller deposits in purchasing homes.

3. First-Time Buyer Support:
• First-time buyers, often relying on support from family (Bank of Mum and Dad), face hurdles related to income and deposit affordability.
• The extension of the mortgage guarantee scheme is seen as beneficial for first-time buyers struggling to borrow for their first property.

4. Scheme Usage and Comparison:
• Since its start in April 2021, the mortgage guarantee scheme has assisted 37,800 households, with 86% being first-time buyers.
• However, in comparison, the Help to Buy equity loan scheme, over a decade, aided 387,200 buyers, with 85% being first-time buyers.
• The extension’s success depends on improving affordability and appeal.

5. National Living Wage Increase and National Insurance Cut:
• The Chancellor focused on boosting household incomes to enhance housing affordability.
• A National Living Wage increase and National Insurance cut for employees and self-employed individuals aim to alleviate financial strain.

6. Inflation Target and Mortgage Rates:
• The Bank of England projects inflation to reach the 2% target in 2025.
• If inflation decreases as expected, mortgage rates could fall faster in 2024, potentially leading to increased house sales.

7. Government’s Focus:
• The government’s primary focus should be policies supporting a reduction in borrowing costs for all buyer groups.
• Measures should include boosting housing supply through new construction and supporting affordable housing schemes.

8. Investment in New Homes Supply:
• Over £110 million will be invested in the next two years to build 40,000 new homes and boost housing supply.
• £32 million will target clearing the planning backlog and developing new housing in cities like Cambridge, London, and Leeds.
• An additional £450 million will be allocated to the Local Authority Housing Fund for around 2,400 new homes.

9. Permitted Development Right and Housing Conversion:
• Plans to consult on a new permitted development right, allowing any home to be converted into two flats while maintaining the exterior.

10. Local Housing Allowance Rate Increase:
• The Local Housing Allowance rate, affecting assistance for renting from a private landlord, will be increased after being frozen since 2020.
• The increase aims to support families facing challenges in affording rising rents, benefiting 1.6 million households with an average of £800 of support.

The Autumn Statement emphasises measures to support housing affordability, stimulate construction, and enhance financial support for prospective homebuyers. For some extra advice, please feel free to contact one of our expert agents here at Bourne.

Sourced from Zoopla

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