The UK property market is on the brink of increased activity over the next year.
- Mortgage rates are expected to fall, irrespective of the budget results.
- Potential changes in Capital Gains Tax could impact investor decisions.
- The Bank of England may reduce its base rate following lower inflation figures.
- Economists predict a decline in mortgage rates, easing financial burdens.
The UK property market is poised for significant growth as anticipated reductions in mortgage rates are set to stimulate activity over the coming year. These changes come amidst discussions concerning the possible outcomes of the recent Autumn Budget, although the expected decline in rates seems independent of these deliberations.
Jonathan Samuels, CEO of Octane Capital, highlighted current hesitations among lenders to aggressively compete on mortgage rates due to the uncertainty surrounding the budget. Investors are especially attentive to potential amendments to Capital Gains Tax (CGT), with rumours that Chancellor Rachel Reeves might increase it from 24% to 40% for higher rate taxpayers. However, if property investments are exempt from these changes, it could offer some solace to buy-to-let investors.
Discussion on Inheritance Tax reveals it remains at 40% for estates exceeding £325,000 in value. Should Labour refrain from intervention, the heightened Stamp Duty thresholds are set to revert in April 2025, dropping the nil band from £250,000 to £125,000 and from £425,000 to £300,000 for first-time buyers. If current rates persist, there could be a surge in market activity as the deadline approaches.
The economic landscape indicates that the Bank of England might decrease its base rate to 4.75% in November, following a drop in the CPI inflation rate to 1.7% in September, which is beneath the Bank’s target of 2%. The average mortgage rate for an 85% loan-to-value (LTV) 2-year fixed-rate mortgage was 4.87% in September, and economists project a considerable decline in rates through the next year.
Research from consultancy Capital Economics suggests that the average interest rate might reduce to 4% by the end of the following year, with Goldman Sachs offering an even more favourable prediction of 3%. Averaging these forecasts, those acquiring an average-priced property with an 85% LTV mortgage could see a reduction in monthly payments by approximately £150.
In Jonathan Samuels’ words: “Investors are worried about the impact of this week’s Budget, largely stoked by the government’s talk of a ‘£22 billion black hole’ in public finances that they need to fix. With this in mind, mortgage lenders are waiting to see how the government’s announcement alters the market before they start dropping rates to gain market share.”
The UK property market is set for a promising period of growth, driven by anticipated reductions in mortgage rates and strategic fiscal decisions.
