Photo by Budget 2024: What Homeowners and First-Time Buyers Should Know
The Autumn Budget is on the horizon, and with a new government taking the reins, significant changes may be in store for homeowners, landlords, and first-time buyers in the UK. Chancellor Rachel Reeves is poised to unveil her first Budget on October 30, 2024, and the anticipation surrounding announcements that could profoundly affect housing policies is palpable.
Navigating Stamp Duty Changes
Currently, first-time buyers enjoy a stamp duty exemption on properties valued up to £425,000. This threshold was raised from £300,000 in 2022 as a temporary measure, but many are bracing for a reversion in April 2025. For those moving home, the stamp duty threshold is set to drop from £250,000 back to £125,000 under the same legislation.
With many advocating for a freeze on these thresholds, it is noteworthy that a David Wilson Homes survey revealed 76% of homeowners support a review of stamp duty rates. Furthermore, a Benham and Reeves poll indicated that 67% of first-time buyers are hoping for a stamp duty holiday. Despite this, the government appears geared to follow through on the scheduled changes, as evidenced by statements from industry leaders.
“These changes will make it even harder for people to buy their first home,” cautioned Paula Higgins, chief executive of the HomeOwners Alliance.
The Freedom to Buy Initiative
Another potentially transformative aspect of the upcoming Budget is the anticipated introduction of the Freedom to Buy scheme, a key pledge from Labour aimed at improving access to low-deposit mortgages under the revamped Mortgage Guarantee Scheme. Though details remain scant, there is hope that the Chancellor could flesh out the specifics during her speech.
Additionally, the Lifetime ISA (LISA) scheme, which allows first-time buyers to save up to £4,000 annually with a government bonus, is ripe for reform. Currently, an outdated penalty mechanism discourages participation for properties exceeding the £450,000 cap, which has not changed since 2017. Upgrading this system could potentially allow more individuals in higher-priced markets like London access to this saving strategy.
Homeownership is under pressure as the government prepares for Budget 2024.
Capital Gains Tax Speculations
As speculation intensifies regarding potential increases in capital gains tax (CGT), experts anticipate significant ramifications for buy-to-let landlords and investors. Reports indicate heightened inquiries concerning CGT, particularly as landlords consider divesting properties before potential hikes come into effect.
Higgins highlighted a concerning trend: “Many landlords have already started selling buy-to-let properties in anticipation of these predicted changes,” noting that around 1 million new homes could be made available for purchase, aiding first-time buyers in their journey to homeownership.
Moreover, a survey by AJ Bell indicated that over a quarter of financial advisers have experienced increased CGT queries, with many landlords shifting their properties to more tax-efficient limited companies.
The Growth of Second Charge Mortgages
In a distinct but related trend, second charge mortgages have been gaining traction among homeowners seeking financial solutions post-pandemic. According to research by Pepper Money, there has been a 17% year-on-year increase in second charge mortgage lending, surpassing first-time buyer lending growth. Homeowners are utilizing these loans for various purposes, such as debt consolidation, home improvements, and even funding new buy-to-let deposits.
Implementing second charge mortgages offers individuals the advantage of accessing home equity without impacting existing mortgage rates. Traditionally seen as a niche option, there’s growing awareness of the benefits these loans provide, especially compared to personal loans or credit cards, which may carry higher interest rates and rigid repayment terms.
Second charge mortgages offer a versatile option for homeowners to tap into their equity.
Ryan McGrath from Pepper Money stated, “Taking out a homeowner loan is still a niche pursuit, but we’re starting to see this change as customers realise the financial firepower they have stored away in bricks and mortar.” This indicates a possible shift in perception and increased utilization of second charge mortgages as a mainstream option.
Conclusion
As the UK braces for the upcoming Budget, the ripple effects of potential policy changes will undoubtedly reverberate through the housing market. For homeowners and first-time buyers, keeping a close eye on the Chancellor’s proposals could be crucial in navigating the uncertainties ahead. With growing support for reforming stamp duty, the promise of new initiatives like the Freedom to Buy scheme, and the rising popularity of second charge mortgages, it’s an evolving landscape that warrants attention whether you’re a seasoned property investor or a hopeful first-time buyer.
Let’s hope the upcoming Budget reflects positively on the aspirations of many who are eager to step onto the property ladder and secure their financial future.
