Home Property Treasury set to extend support for first-time buyers as UK housing market shows signs of cooling

Treasury set to extend support for first-time buyers as UK housing market shows signs of cooling

by LLP Finance Reporter
23rd Oct 23 3:17 pm

New reports indicate that Chancellor Jeremy Hunt is expected to announce a one-year extension of the mortgage guarantee scheme in his Autumn Statement next month, in a bid to help those struggling to step foot on the property ladder due to record-high mortgage rates.

UK house prices have recorded its fastest fall in fourteen years while a ‘noticeable’ drop in inflation has also prompted the Bank of England to hold interest rates at 5.25%, in its first pause since December 2021.

Amidst falling house prices and the Bank of England’s pause in hiking interest rates last month, David Hannah, Chairman of Cornerstone Tax, the UK’s leading property tax experts, explains why this, alongside Britain’s changing policy landscape, offers a glimmer of hope to those looking to take their first step on the housing ladder, and what this means for prospective homeowners.

First introduced in March 2021 by then Chancellor, Rishi Sunak in a bid to keep the housing market alive during the pandemic, the mortgage guarantee scheme was designed to allow prospective homeowners to buy a property worth up to £600,000 with a deposit of just 5%.

Given that those with small deposits are often considered ‘riskier’, the scheme enables the government to underwrite a part of this risk for lenders, which in turn stimulates the industry. A potential extension of the initiative comes amidst growing pressures for first-time buyers with many lenders offering reduced mortgage rates to attract customers, while the government is also reportedly considering a new ISA to encourage potential buyers to save for their first home.

As rental prices continue to soar following a record number of landlords exiting the market, causing a significant supply and demand imbalance, Hannah asserts that these reports should provide some hope for Generation Stuck, especially given that 42% of UK tenants say their biggest anxiety is that they’ll be renting for the rest of their lives. Hannah also suggests that the property sector could as a result, expect to see a flurry of activity towards the end of the year and into Q1 2024.

David Hannah, Group Chairman of Cornerstone Group International, said, “The government’s potential extension of the mortgage guarantee scheme comes as welcome news for those looking to take their first step on the ladder. It’s been a rocky few years for the UK housing market thanks to rising borrowing costs and stubbornly-high inflationary figures, with those having saved up for a deposit unable to secure home ownership as a result.

“First-time buyers have been priced out of the market for too long, so I think this announcement indicates a step in the right direction. Britain’s rental market doesn’t seem to be cooling anytime soon, and a growing imbalance between supply and demand which has largely been catalysed by a record number of landlords selling their buy-to-lets has continued to add pressure to the rental sector. Our data shows that 1-in-4 UK renters have lost out on a property due to growing competition and bidding wars.

“It’s great to see more encouragement for the younger generation to get a foot on the property ladder, as I expect it’ll hep stimulate the property industry and economy in the next year.

“As house prices continue to fall while the central bank paused interest rate hikes last month for the first time in almost two years, we can expect to see a flurry of activity towards the end of the year and early 2024, despite historically being known as a quieter period for the market, as first-time buyers take advantage of the wave of new mortgage deals available on the market.”

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