Property industry reacts to UK government's U-turn on fiscal plans

"Today will bring an air of positivity to what was quickly becoming a beleaguered property market"

Property industry reacts to UK government's U-turn on fiscal plans

Following new chancellor Jeremy Hunt’s statement on Monday that “almost all the tax measures” announced by his predecessor Kwasi Kwarteng will be reversed, experts in the property industry shared their different views on the emergency statement about the medium-term fiscal plan.

Simon Webb, managing director of capital markets and finance at later life lender LiveMore, said Hunt’s statement was a “huge U-turn for the government” and “puts us back to the position we were in before the mini budget.”

“It is positive that the stamp duty cut will stay in place, but more important will be its effect on the markets,” Webb pointed out. “This was clearly a speech to bring a level of much-needed stability and confidence back.

“While interest rates were already on an upward trajectory, the level of rises we have seen in the past fortnight has outstripped most people’s ability to cope. We all need to hope that this speech and the next fiscal statement on October 31 will be enough to steady the markets – enough that lenders can reprice and reintroduce the hundreds of mortgage products that necessarily had to be pulled due to market instability.”

Emma Hollingworth, distribution director at fintech lender MPowered Mortgages, commented that the new chancellor’s decision not to scrap the cuts to the stamp duty was an indication that the government was still serious about tackling the issues facing homebuyers.

“Interest rates are now at the highest level since 2008, meaning many first-time buyers will struggle to get on the housing ladder, so the cuts to stamp duty are a welcome change for this group, in particular,” she said. 

Hollingworth pointed out that supporting both homebuyers and homeowners is a priority now more that it has ever been, especially in an environment where the cost-of-living and mortgage rates continue to rise.

“Confidence will come from support which we have already seen in the form of help with energy bills and SDLT cuts,” she said. “Lenders can also play their part by being wise to the concerns many will be facing and adjusting products accordingly – whether it be in the form of free valuations, cashback products, or competitive rates.”

Richard Pike, chief sales and marketing officer at Phoebus Software, noted that the initial market reactions on the U-turns were calm, which is a big positive.

“Some borrowers would have been assisted by the 19% rate now reversed, and the additional uncertainty of the review of the fuel allowance now being six months instead of two years will be a concern, even though media headlines will stoke fires in this area,” Pike said. “The reality is that wholesale fuel prices could change in six months and in April the need for lighting and heating is a lot less over the summer months, and so this is a sensible approach.”

“For the housing market, we only have to look at the latest Rightmove House Price Index released today, which shows that house prices have hit another new record average, despite recent economic turmoil - something that highlights the continuing problem of supply and demand. While the demand is there and the changes to stamp duty remain, along with an imminent increase in interest rates, pressure is almost certainly going to be on lenders.

Read more: Rightmove reveals latest on house prices.

“The reduction in the number of mortgage products available since the mini budget is a cause for concern, especially for first-time buyers. Now is the time for lender innovation to ensure that the continued demand can be catered for.

“It is still early, but rising interest rates and high inflation have yet to quell borrower appetite. How long that will be the case remains to be seen, but for now, we all need to keep adapting to the ever-changing landscape. The interest rate decision later this month will be a big barometer of what the Bank of England thinks of this U-turn.”

For Iain Crawford, chief executive at Alliance Fund, the government’s “shambolic behaviour” is unlikely to distil much confidence in the UK economy.

“However, as it stands, the UK public will embrace any shred of stability afforded to them in what are currently very uncertain times and the one silver lining of this latest government backtrack should be a boost to property market confidence,” he added. “We’re already seeing a strengthening of the pound with gilt yields also dropping, and this easing pressure on the markets should reduce the likelihood of higher interest rates.

“This will help settle what has been a turbulent mortgage market in recent weeks, rejuvenating buyer demand levels, which will also help to stabilise house prices and investment into the UK property market.”

It is impossible to tell what direction the economy will head in following this latest development, according to James Forrester, managing director at real estate agency Barrows and Forrester. He, however, believes that “today will bring an air of positivity to what was quickly becoming a beleaguered property market.”

“Stability in the gilt markets will bring positive movement for those looking to borrow,” he said. “But it’s important to understand that we aren’t going to return to a sub-1% base rate, and homebuyers must be prepared to pay more in mortgage costs when climbing the ladder.

“The government’s choice to maintain the cut to stamp duty tax signals their intent to keep the property market buoyant, and this should help boost buyer confidence in itself.”