The Budget was expected to provide some ‘breathing space’, but for many in the property market we’re still holding our breath for the expected changes. Against a backdrop of borrowing costs, affordability pressures and regulatory changes, we examine the key implications for mortgage borrowers, homebuyers and property investors.
1. Higher taxes on banks: Could mortgage rates increase?
An increase in the tax burden on banks could affect mortgage pricing, savings rates and lending appetite. Banks may absorb additional costs through lower profit margins or seek to recover them through higher mortgage rates, reduced savings rates or tighter lending criteria. However, increased taxation will not automatically result in higher mortgage rates. Funding costs, swap rates and competition remain significant factors.
Potential impact: Borrowers should monitor lender pricing and product availability when purchasing or refinancing. Planning ahead is key.
2. First-time buyers: A potential boost to home ownership
The proposed Your First Home scheme aims to help eligible first-time buyers in England purchase new-build properties with deposits of just 2.5%, supported by a Government equity loan of up to 20%.
The scheme could help buyers who can afford monthly repayments but struggle to save a conventional deposit. Its effectiveness will depend on eligibility, property price limits and the terms of the equity loan.
Potential impact: Improved access to home ownership for some buyers and increased demand for eligible new-build properties.
3. Mortgage lending: Affordability remains critical
Changes to mortgage lending rules taking effect on 28 October give lenders greater flexibility over higher loan-to-income lending. This could create opportunities for borrowers with strong incomes but limited deposits.
However, greater flexibility does not guarantee higher borrowing multiples. Lenders will continue to assess affordability, creditworthiness and individual circumstances.
Potential impact: Some borrowers may benefit from increased borrowing capacity, but lender selection and the quality of an application remain crucial.
4. Landlords and property investors: Tax and regulation
Landlords continue to face changes to taxation, tenancy legislation and property standards. Higher property income tax rates scheduled for April 2027 may further influence investment decisions.
The combined effect of taxation, mortgage costs and regulatory obligations may prompt landlords to review portfolio profitability, refinancing options and ownership structures. We expect to see a greater disposal of properties or higher rents pushing more first-time buyers into the market.
5. Property transactions: Confidence is key
Stamp Duty Land Tax remains a significant consideration for buyers and investors in England and Northern Ireland. Ultimately, transaction levels will depend on borrowing costs, achievable property prices and confidence in the economic outlook. Buyers need certainty over affordability, while sellers must maintain realistic price expectations.
6. The outlook for mortgage borrowers
Mortgage pricing is influenced by swap rates, lender funding costs and competition, as well as expectations for inflation and Government borrowing.
Borrowers approaching the end of a fixed-rate mortgage should review their options early rather than rely on rates falling. For property investors and those with complex income, obtaining advice early can help identify suitable lenders and avoid unnecessary delays.
Our view
After months of uncertainty, even limited changes may help restore confidence. The key question is whether that confidence translates into increased activity across the property market.
Planning your next property move? Contact us or call 020 8044 5693 to explore your mortgage options.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
MSP Financial Solutions Ltd is an Appointed Representative of New Leaf Distribution Ltd, which is authorised and regulated by the Financial Conduct Authority