Adviser warns stamp duty, a stalled base rate and fading confidence are leaving London buyers unable to move
London's housing market is sliding further behind the rest of the country, with high mortgage rates, stamp duty costs and uncertainty over the Bank of England's next move leaving buyers and sellers stuck ahead of the Autumn Budget.
The capital's average property price fell 3.3% in the 12 months to July, its 11th consecutive month of annual decline, while the North East recorded growth of 4.9% over the same period, according to the UK House Price Index published by HM Land Registry.
Nouran Moustafa (pictured top), executive financial and mortgage adviser at London-based Roxton Wealth, told Mortgage Introducer the cost of borrowing is shutting buyers out.
"People can't buy because of the interest rates now," she said.
Asked how current conditions compared with previous downturns, she pointed to the turmoil that followed the September 2022 mini-Budget.
"It's worse than the Liz Truss era, put it like that."
Why London is falling behind the north
Moustafa said the capital's higher price points means stamp duty land tax weighs far more heavily on London buyers than on those elsewhere in England.
"Stamp duty is the issue. Up in the north, you can go get a castle for £400,000. Happy days, but here in London, £400,000 can barely get you a garage."
Since April 2025, first-time buyers in England have paid no stamp duty on purchases up to £300,000, with relief withdrawn entirely on homes above £500,000. Moustafa said this has left many first-time buyers caught between two upfront costs.
"First-time buyers, if they can afford the deposit, they can't afford the stamp duty. If they can afford the stamp duty, they can't afford the deposit."
She added that London's appeal to investors has also faded, with some now choosing markets such as Dubai over the capital.
"Everyone is trying to pull out of London," she said.
What the Bank of England's hold means for lenders
The Monetary Policy Committee voted 6–3 to hold Bank Rate at 3.75% earlier this month, with three members backing a rise to 4% after Consumer Prices Index (CPI) inflation climbed to 3.1% in August. It marked the Bank of England's sixth consecutive hold at 3.75% this year.
Moustafa said the decision has left borrowers and advisers struggling to make sense of the Bank's stance.
"The main driving factors is obviously Bank of England insisting to back Westminster instead of backing the economy for a reason that I can't understand."
The Bank sets interest rates independently of government under the Bank of England Act 1998. Moustafa argued, however, that holding rates ahead of a major fiscal event left the market exposed.
"What they don't understand is that not allowing the Bank of England to increase the base rate just before the budget, this means that if they come out with a chaotic budget, the whole market is going to crash."
She said the uncertainty has now reached lenders themselves.
"Even banks don't know how to price nowadays. This is how much of a state we have reached that banks themselves don't know how to price."
Market expectations have shifted sharply since the summer, with traders pricing in three Bank of England rate rises at one stage and the MPC's next decision due on 5 November. Moustafa said gilt markets have already sounded the alarm.
"The bond market has given enough warnings, but nobody wants to listen to the bond market."
What brokers need from the Budget
Chancellor John Healey will deliver his first Budget on 28 October, the first under Prime Minister Andy Burnham since taking office in July. The Budget is also due to confirm funding and timelines for Burnham's Your First Home scheme for first-time buyers, announced on Saturday, which will support 2.5% deposits on new-build homes in England backed by 20% government equity loans.
Moustafa said she expects pressure to build on households approaching the end of fixed-rate deals.
"When you come off that fixed rate and then all of a sudden you can no longer afford your home, what are you going to do? You're going to sell. We will be watching so many houses on the market for so many months."
She said strain is already showing among the clients she’s advised this year.
"I've seen this year the highest level of debt consolidation ever."
Rather than new giveaways, Moustafa said the Budget needed to offer clarity on property taxes and the wider economy.
"We genuinely need to just have some stability in the market. This is all we need. We’re not asking for anything outrageous. We're not asking for anything out of the norm. We just need to see stability. We need to see a final decision regarding what would happen with the stamp duty."
Brokers are still weighing what the Bank of England's latest decision means for the mortgage market. Moustafa said the longer-term cost of today's affordability squeeze would fall hardest on those now aged 21 to 25.
"These people are absolutely not going to afford a home anytime before their 40s. They will be working until their 70s and potentially even their 80s to be able to clear off the mortgage of that home."
She warned that lower rates of home ownership would ultimately shift costs onto the state, from rent support in retirement to funding social care.
"Right now, we’re building up a disaster that we will all pay for later."
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