Nationwide’s October house price index shows modest growth, with a 0.1% month-on-month increase and an annual rise of 2.4%, although this represents a slowdown from September’s 3.2%. The average property price is now £265,738. Experts warn that recent Budget changes could create additional challenges for buyers and landlords, as mortgage rates rise and stamp duty changes take effect.

Budget Pressures on the Housing Market

The Budget has introduced new pressures on the housing market. Sarah Coles, head of personal finance at Hargreaves Lansdown, noted that the Budget’s announcements could lead to more failed transactions and deter buyers due to higher stamp duty and mortgage rates. Although many landlords anticipated a capital gains tax (CGT) increase and rushed to sell, the Chancellor instead raised the stamp duty surcharge for second homes from 3% to 5%, adding approximately £4,000 to typical purchases. This change may prompt some landlords to rethink their decision to sell.

Impact of Stamp Duty Changes

The current stamp duty holiday, which ends in March 2024, allows first-time buyers to pay no stamp duty on the first £425,000 of property value, with existing homeowners also benefiting from a raised threshold. Marc von Grundherr of Benham and Reeves anticipates a surge in transactions before the holiday ends, as buyers rush to finalize deals while the thresholds remain favorable.

Mortgage Rates Expected to Increase

Budget-related borrowing plans have driven up gilt yields, influencing fixed-rate mortgage rates. With gilt yields above 4.5%, fixed-rate mortgages are set to rise, potentially pricing out some buyers. Variable-rate mortgage holders may also see rate increases as Bank of England rate cuts are expected to be delayed. Although not as severe as the post-mini-Budget hikes, the upward trend could create affordability challenges for prospective homeowners.

Market Stability Despite Slower Growth

Despite slowing growth, experts express cautious optimism about the UK housing market’s stability. Ed Phillips, CEO of Lomond, highlighted stability as essential for the market’s health, with confidence that momentum could increase as interest rate cuts become a possibility. Verona Frankish, CEO of Yopa, noted that house prices have remained steady despite Budget month pressures and that the end of the stamp duty holiday is unlikely to cause a drastic market drop.

Future Outlook

The coming months present both challenges and opportunities for landlords, investors, and buyers. Rising mortgage rates, the stamp duty holiday’s end, and potential regulatory shifts may shape the property landscape. Experts suggest that buyers act soon to secure current rates, while landlords and investors should monitor regulatory changes that could impact investment decisions.