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Autumn statement 2023: what might it mean for London first-time buyers and homeowners?

 (ES composite)
(ES composite)

Chancellor Jeremy Hunt will deliver his 2023 Autumn Statement at 12.30pm on Wednesday 22 November.

Alongside the Budget in spring, it’s the time for the government to reveal its future spending and tax plans.

As well as having an impact on household finances, there are several announcements that could be of interest to homeowners and those hoping to buy.

Last year’s Autumn Statement came hot on the heels of the disastrous mini budget that ended Liz Truss’s short stint as Prime Minister after then-Chancellor Kwasi Kwarteng sent inflation soaring and plunged the UK property market into mortgage chaos, falling sales and house prices, and an escalating rental crisis.

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One year on, as Londoners struggle with high interest rates and the cost-of-living crisis chipping away at their housing security, could there be relief on the horizon revealed tomorrow?

Stamp duty threshold changes?

Stamp Duty Land Tax (SDLT) could be on the agenda, but the (contested) reforms bought in last year are due to last until 2025 – so there may be no change here.

SDLT is a tax charged when you buy property or land in England and Northern Ireland. Rates are graduated so the amount you pay is dependent on the type and price of the property, and who the purchaser is.

As part of the mini budget delivered in September 2022, Kwarteng reduced SDLT by raising the price threshold where it’s not paid – also known as the nil rate band (NRB).

Under these changes, first-time buyers (FTBs) purchasing a property for £435,000 or less pay no SDLT at all, although in London, where Halifax reports that the average property price for a FTB is £496,203, many will still pay some SDLT.

For properties between £425,000 and £625,000, FTBs can claim relief and pay five per cent of the part of the property value that’s above that threshold, a saving of up to £8,750.

If the property costs more than £625,000, first-time buyers must pay stamp duty at the normal rate.

When Jeremy Hunt took on the role of chancellor following the fallout from said mini budget, he introduced a sunset clause for these reforms, so these limits will only apply until March 2025.

Even with these recent changes, more relief would be welcome for first-time buyers in the current economic climate, Rightmove's Tim Bannister said.

“Further cuts or a permanent change to the thresholds would be welcomed by many, particularly by affordability-stretched first-time buyers,” said Bannister.

“However, further stamp duty cuts are unlikely to lead to a rush of activity, as buyers would need to weigh up any benefit in savings against higher mortgage rates and their monthly mortgage payments.”

Stamp duty receipts have fallen sharply this year as property sales slumped due to the cost-of-living crisis.

There have been rumours that the government is considering extending SDLT to existing homeowners trying to downsize from a larger property to free up more, larger homes.

A recent study found one in three over 65s in London have more than one spare bedroom in their house.

But experts have cautioned that these kinds of cuts could have unintended consequences.

“Cuts to Stamp Duty Land Tax will likely result in higher volumes of property sales but the Chancellor must consider the knock-on effects,” said Tim Walford-Fitzgerald, private client partner at accountancy firm HW Fisher.

“The introduction of a ‘downsizing relief’ may drive more empty nesters to sell up and increase the number of larger properties coming onto the market – but these downsizers still need to live somewhere,” he explained.

“This could drive competition over properties that are classic first-time buyer territory, pushing up the prices for a demographic that the government should be supporting.

Rob Houghton, founder and CEO of reallymoving, argued that first-time buyers should get more support over downsizers with any stamp duty changes.

“Scrapping stamp duty for downsizers would target help at equity-rich homeowners, when right now support is more urgently needed at the other end of the market,” he said.

“Our data shows downsizers are already a very active group this year, motivated by the desire to reduce energy bills by switching to a smaller home that’s cheaper to run, which is helping free up larger family homes,” Houghton added.

“Any bandwidth in the budget for housing market support would be better targeted at first-time buyers, who face unprecedented challenges raising deposits in the midst of a cost-of-living crisis and affording higher mortgage rates.”

Inheritance tax cuts?

Rumours are swirling that the government is considering a sizeable cut to inheritance tax in a bid to woo wealthy voters.

Inheritance tax is nominally a death duty paid to the state when you die.

Currently, the standard inheritance tax rate is 40 per cent, which is charged on the part of the estate over the tax-free threshold of £325,000.

The Times has reported this could be halved to just 20 per cent in the upcoming autumn statement.

In London, where high property prices mean more people pay this tax than the national average, property currently accounts for 50 per cent of the money in estates paying inheritance tax, according to retirement specialist Just Group.

But for most people, inheritance tax isn’t as big of a deal as they might think, said financial expert Martin Lewis.

“The reality is, only four per cent of estates have to pay inheritance tax, but a much higher percentage of people worry about it,” Lewis told Politics Home.

“My answer to that would be it would be a lot cheaper to educate people about the system than it would to change the system.”

There are also concerns that reducing inheritance tax could compound the existing housing inequality between those who inherit wealth and those who don’t.

Mortgage guarantee scheme extension?

Another move in the Autumn Statement that may be relevant to first-time buyers is a potential extension to the existing mortgage guarantee scheme.

Introduced in March 2021 by then-chancellor Rishi Sunak, the scheme encourages mortgage providers to lend to would-be borrowers with smaller deposits.

Under the scheme, buyers can apply to take out a mortgage with a deposit of just five per cent on a home worth up to £600,000.

The scheme protects mortgage lenders offering these 95 per cent loans by the government promising to cover the losses if the borrower is unable to pay their mortgage and their house is repossessed.

Originally due to finish in December 2022, it was extended by another 12 months. It could still end next month, or another extension could be granted in this autumn statement.

“Any focus and support for those with the smallest deposits is always going to be welcome,” said Matt Smith, Rightmove’s mortgage expert.

“However, in reality the mortgage guarantee scheme is only able to help a very small portion of movers, with the majority of first-time buyers preferring to get the affordability benefits of saving for a bigger deposit,” he added.

“If the scheme was cancelled then it may be seen as a disappointing outcome by some, but in reality, it’s unlikely to have a significant impact on consumer choice, as many lenders are offering five per cent deposit deals outside of the government scheme.”

As well as 95 per cent loans costing buyers more each month, saving for a deposit is only half the battle argued Bannister.

“Having enough affordable homes in the right places has been an ongoing challenge,” he said.

“It’s clear from our analysis that people trying to buy on their own on the average salary are likely to be priced out of the majority of homes without significant financial help from elsewhere.”

Lisa’s for deposit savings?

There have also been whispers of new or improved Lifetime Isas – something that would be of interest to people saving up for the deposit on their first home.

Currently people aged between 18 and 39 can save up to £4,000 a year tax-free in a Lisa, with the government topping up their savings by 25 per cent.

This money can only be withdrawn without incurring a hefty penalty for buying a first home or turning 60.

Under the existing rules, this first house purchase must be on a property that costs £450,000 or less.

In London, where the average price of a house being put on the market in November was £673,257, this can be an obstacle to first-time buyers, particularly for two savers buying together.

If you try to buy a house above that threshold, you’ll be stung by a 25 per cent penalty charge.

"First-time buyers who can’t find a suitable home under that limit and who choose to purchase a property over it not only lose the government bonus and any interest they’ve earned, they also lose around 6.25 per cent of their own savings," Katie Watts, head of campaigns at MoneySavingExpert told Homes & Property.

"For someone who’s been saving the maximum since the scheme started, that is a penalty of £1,750 of their own cash."

A raising of the threshold could benefit Londoner’s who have a chunky enough deposit already saved, then.

There are also rumours about a brand-new type of Lisa to encourage people to save for a deposit, but as no details have been released it’s hard to speculate what this could be.

To find out fact from fiction, you’ll have to tune in to our autumn statement live blog tomorrow to find out.