MortgagesDec 23 2015

Mortgage spotlight: Autumn statement

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Mortgage spotlight: Autumn statement

Once again, the chancellor made it clear in his Autumn Statement in November that he is backing “families that aspire to own their own home”. Quoting a statistic on the decline in home ownership in the UK, among the under-35s in particular, he acknowledged the need to provide homes that are affordable not just to rent, but also to buy. His pledges included starter homes with a 20 per cent discount for young first time buyers, help-to-buy initiatives both for shared ownership and specifically for London, as well as new house building and an increased housing budget.

In his statement the chancellor acknowledged the significance of affordability in the UK housing market for both renting and buying, but his main emphasis was on buying: “We choose to build the houses that people can buy,” he said. In light of that, one of his most important pledges was the promise to build 400,000 new homes over the next five years, of which nearly half would be starter homes sold at a discount to younger borrowers and 135,000 would be new homes made available under the new Help to buy shared ownership scheme. The failure of successive governments to build anywhere near the 200,000 or so new homes required per annum has greatly contributed to UK house price inflation. So any serious attempt to address affordability has to include a house-building programme.

Who pays?

However, these new schemes are partly at the expense of buy-to-let investors. “Frankly, people buying a home to let should not be squeezing out families who can’t afford a home to buy,” Mr Osborne suggested. Not content with reducing the tax relief on mortgage interest for buy-to-let investors and imposing stricter rules on how landlords claim for relief on wear and tear, the chancellor increased the stamp duty payable on a property purchased for buy-to-let. From April 2016, the amount of stamp duty on such properties and holiday homes will rise by 3 per cent. Although not all the details of how this will work have been finalised, some of the money raised from the extra stamp duty will be ploughed back into “local communities… which are being priced out of home ownership”.

Not surprisingly, there are strong objections to these changes, critics suggesting that they could lead to unintended consequences such as a reduction in the private rented sector or a rush to buy before the April 2016 deadline, fuelling some kind of housing bubble.