Snap Statement: What do budget reversals mean for landlords?
What Jeremy Hunt’s statement means for mortgages and the housing industry
Jeremy Hunt, as the new Chancellor of the Exchequer, made a statement on Monday 17th October ahead of his Medium Term Fiscal Plan, due on the 31st of October. This statement attempted to calm the markets following the swift departure of Kwasi Kwarteng from the position mere weeks after his now infamous mini-budget caused such uncertainty that stirling spiralled leading to mortgage rates rising steeply.
But with many people already faced with huge increases to their mortgage payments, what does the new statement mean for mortgage rates and the housing market at large?
Almost all tax cuts reversed
In an unusual 11am statement to the media ahead of his address to parliament at 3.30pm – a move intended to steady the markets as swiftly as possible – Mr Hunt made the surprise announcement of the reversal of almost every tax cut from Mr Kwarteng’s mini-budget.
On top of the previously announced u-turn on lowering corporation tax, Mr Hunt set out that the government “will reverse almost all the tax measures announced in the growth plan three weeks ago that have not [already started the parliamentary process].”
He went on to say:
It is a deeply held Conservative value – a value that I share – that people should keep more of the money that they earn. But at a time when markets are rightly demanding commitments to sustainable public finances, it is not right to borrow to fund this tax cut.
What does the U-turn mean for mortgages?
The move will give the treasury back £32billion in taxes, which Mr Hunt will be hoping is enough to calm jittery financial markets and demonstrate that the UK can balance its books.
But whether the move will be enough to achieve the desired stability, and how long it might take for the waters to calm, is still in doubt, and with a reported £72 billion hole in public finances still to be accounted for and further spending cuts to follow.
Although the pound rallied at the statement, the reaction of the media and markets shows that many don’t foresee the U-turn bringing any immediate reversal in mortgage rates.
The BBC Business page stated that “Lenders are likely to “play safe”, waiting to see how the markets react to the changes, and – critically – what the Bank of England is likely to do with interest rates. Any lender dropping their rates now could also be inundated with demand.”
According to the BBC, “The backdrop is unchanged. Inflation is still high, and the Bank is still expected to tackle that with higher interest rates. Average rates have been unchanged in recent days.”
What does this mean for mortgages?
For many whose plans to buy their home have already been upended by soaring mortgage rates, this statement won’t bring enough certainty to the volatile situation to provide much needed assurance. Much will depend on the reaction of the markets in the days and weeks ahead.It’s a stressful time to be looking for a first or new home and even more stressful if you’re already a homeowner with a remortgage looming. The best thing you can do is get advice from experts, so if you are looking for guidance, book a call with our Mashroom Mortgage experts who’ll be able to help you.
