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Your October market update

In a month of economic and political chaos, U-turns, sackings, resignations and a new PM, we’re here to bring some clarity and calm.

Dog Moving

It’s been a rollercoaster month, with policies announced and U-turned quicker than we could say “get out from underneath your desk”. Not to mention the sacking of the Chancellor Kwasi Kwarteng, the resignation not only of the Home Secretary Suella Braverman, but also our PM Liz Truss (after being in office for just 44 days), AND the announcement of Rishi Sunak as our new Prime Minister. It’s a LOT to process, particularly if you’re trying to get to grips with the housing market and work out whether now is the right time to make a move. We can’t predict what will happen over the next few weeks, but we can try to break it all down for you a bit and hopefully make it a little more manageable.

What were Liz Truss’ Policies and Jeremy Hunt’s U-turns?

On Monday Jeremy Hunt (who has taken over from Kwasi Kwarteng as Chancellor) U-turned on almost all of Liz Truss and Kwasi Kwarteng’s economic plans that were announced in the mini budget earlier this month. He was ruthless about reversing the economic plans which had created a £60billion black hole in the economy. Hunt’s main moves included:

  • Scrapping Truss’ tax cuts, e.g. her plans to introduce a 1p cut to income tax, and to cut corporation tax.

  • U-turning on Truss’ freeze on energy bills.

  • Introducing new plans for tax hikes and spending cuts.

Ok so, what are the consequences?

  • Truss wins the unenviable title of being Britain’s shortest-serving prime minister ever, having been outlasted by the famous iceberg lettuce that’s been making headlines this week.

  • These U-turns will save the government around £32bn a year (The Treasury) and reassure the global money markets that the UK is more financially stable, hopefully resulting in a stronger pound. 

  • Many worried that Hunt’s reversal of Truss’ energy bills cap might result in even bigger bills. But this is not necessarily true. Hunt has hinted at a major Windfall Tax (basically a tax from the government put onto a company, in this case the oil and gas companies who are still making enormous profits) in order to more organically reduce the price of energy, closer to the source.

What hasn’t he U-turned?

In other words, what remains of Truss’ policies? A few things, which may affect your personal finances. These include:

  1. Keeping the abolition of the health and social care levy (which means the bill - which was essentially a little bit of extra tax designed to go straight into healthcare - will not be going forward in April).

  2. Retaining the decision to scrap caps on bankers bonuses, meaning the bonuses are unlimited.

  3. The most important factor for the housing market though, is his decision not to reform Liz Truss’ changes to stamp duty.

So Where Are We Now with Stamp Duty?

Hunt chose to maintain the cut to stamp duty initially put in by Truss. What do these cuts look like?

  1. Homebuyers no longer pay stamp duty tax on the first £250,000 of a property purchase (up from £125,000).

  2. First time buyers will also notice a change, with the price at which they pay stamp duty tax at £425,000 (if the property is less than £625,000).

These rules will add up to £2,500 of savings for home movers and up to £11,250 for first time buyers.

And how will this affect the mortgage market?

With the decision to keep the stamp duty cuts in place, the hope is that the property market will return to its former strength.

Hunt chose to maintain the cut to stamp duty initially put in by Truss...These rules will add up to £2,500 of savings for home movers and up to £11,250 for first time buyers."

What's the Deal with Mortgages Right Now?

The mini-budget announced by the government has created more economic uncertainty in what were already unpredictable times across the globe. A lot of mortgage lenders temporarily withdrew or repriced their mortgages until the markets — and interest rates — are easier for them to predict. Mortgage loans for those who can only afford small deposits have been hit hardest, as lenders withdraw from the riskiest areas of the markets. This has meant that first time buyers are the most affected by the changes, as they are more likely to require 95% loan-to-value mortgages (this basically just means they will only want to pay deposits at 5% of the total property value).

The fragile property market has been feeling the toll after mortgage rates soared and potential buyers flailed. A more stable economy plus greater incentives to buy means the mortgage market will gain some strength, allowing buyers to fund their property purchases. In turn, this should cause a more healthy property market as the demand will rise again.

And in the Near Future?

We have already begun to see some small reduction in the interest rates, and the hope is that we shouldn’t see any more drops in the amount of available mortgages. The first thing we'll have to see is what our new PM Rishi Sunak's policy platform is going to be - we suspect he will continue with Hunt's work to "balance the books" or close up the "economic black hole" (basically the gap between money coming in and going out) and we hope he will focus on the cost of living crisis. Everything is up in the air though and we really can't guess what the future holds - in fact last week experts were predicting that mortgage rates would continue to soar, (we also thought Liz Truss would still be PM so there's that...) It’s worth keeping up to date with the mortgage market if you’re thinking of buying or remortgaging soon. And if you need advice about a new mortgage, or you’re within 7 months of renewing your mortgage then get in touch and we can sort you out.

That’s it for this month, hopefully we’ve cut through some of the scaremongering and clickbaity headlines and given you some answers to your questions. Fingers crossed everything will have settled down a little bit by the next newsletter.