In a statement this morning the new Chancellor of the Exchequer reversed many of the tax cuts made by his predecessor, Kwasi Kwarteng, three weeks ago and has scaled back on the support available for energy bills.
Indeed, Mr Hunt did also ditched plans to reduce income tax from 20p in the pound to 19p. But he said the cuts to National Insurance would remain in place as would the reduction in stamp duty.
The mini-budget announced on 23 September included raising the threshold at which homebuyers paid tax on their property from £125,000 to £250,000. For first-time buyers this increased to £425,000.
Nicky Stevenson, managing director at national estate agent group Fine & Country, said: “Against a backdrop of spiking interest rates and unprecedented volatility in the mortgage market, a U-turn on stamp duty would have represented a worrying set-back for the housing market, and buyers will be breathing a sigh of relief at Mr Hunt’s commitment to pressing ahead with change in this area.”
What will the mini-budget reversal mean for mortgages?
But whilst those buying a home may feel a wave of relief that they have avoid higher tax, what will today’s changes to the budget mean for the mortgages they will be taking out to fund the purchases.
Following the huge tax cuts made in the mini-budget there was financial turmoil which sent mortgage rates soaring.
Will the latest move by Jeremy Hunt help slow the rapid interest rate rises predicted? Most experts seem to think the answer to this is a firm ‘no’.
Paula Higgins, CEO of HomeOwners Alliance, said the damage had already been done. “Financial markets continue to predict the base rate could almost treble to 6% next year – up from previous predictions it would top out at 4.75%,” she said.
“It’s accepted the need for a ‘significant’ rate rise in November. It’s almost certain that homeowners will see increases in what they pay for their mortgages.
“The threat of astronomical energy bills – alongside their higher monthly mortgage payments – is hanging over households once again like the sword of Damocles.”
A mortgage broker agreed – Mike Staton, director of Mansfield-based Staton Mortgages said: “This U-turn just shows what a complete farce the past four weeks have been.
“I don’t expect to see mortgage rates reduce anytime soon, as there is still a lot of uncertainty in the air which will cause the Bank of England to play it cautiously. I won’t be surprised if we see a base rate increase of 0.75% to 1% in November.”
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