As the UK government unveiled its highly anticipated Autumn Budget for 2024, first-time home buyers across the country have been left with a mix of emotions.
While some of the changes announced offer glimmers of hope, others pose significant challenges to their homeownership dreams.
Understanding these changes is crucial for anyone looking to take their first step onto the property ladder.
Good News for First-Time Buyers
£5 Billion Boost in Housing Stock
On the positive side, the government’s £5 billion investment to boost the housing stock is a welcome move that could increase the supply of affordable homes. This, in turn, could open up more opportunities for first-time buyers to get a foot on the property ladder.
Mortgage Guarantee Scheme Changes
The government’s intention to make the mortgage guarantee scheme permanent is a positive development for first-time buyers.
This scheme encourages lenders to offer mortgages with higher loan-to-value ratios, making it easier for first home buyers to borrow with smaller deposits.
Reduction in Base Rate
Although not a direct budget measure, the Bank of England has since announced a cut in the base interest rate from 5% to 4.75%.
This reduction could eventually lead to lower mortgage rates, making borrowing cheaper for first-time buyers.
While the immediate impact on mortgage lenders’ rates might not be felt unless you are on a base rate tracker mortgage, this move signals a potential decrease in borrowing costs in the future.
Challenges for First-Time Buyers
However, the news is not all good.
Stamp Duty Threshold Not Extended
The decision to reduce the current £425,000 Stamp Duty threshold for first-time buyers to £300,000 is a significant blow.
This means that from 1st April 2025, purchase prices between £300,000 and £500,000 will be subject to a 5% charge, making it harder for first-time buyers to cover the additional costs.
This could lead to a slowdown in the number of new buyers entering the market, as they may prefer to wait and save more before taking the plunge.
First-Time Buyer Stamp Duty Changes by Property Type
Calculations below are based on national average purchase prices. Properties above these values, especially in high-value areas, may incur different tax charges.
| Property Type | Average Price | Stamp Duty Before Apr 2025 | Stamp Duty After Apr 2025 | Extra Cost |
|---|---|---|---|---|
| Detached | £467,000 | £2,100 |
£8,350* |
+ £6,250 |
| Semi-detached | £296,000 | £0 | £0 | No change |
| Terraced | £254,000 | £0 | £0 | No change |
| Flat | £252,000 | £0 | £0 | No change |
Source: UK House Price Index for July 2024
*Calculated at 5% on purchase price levels above the new £300,000 FTB nil rate band from 01/04/2025.
Increase in Stamp Duty for Second Home Buyers
Furthermore, the immediate increase in Stamp Duty for second-home buyers and landlords, while potentially beneficial for first-time buyers by reducing competition, could also lead to a rise in rental prices, making it harder for them to save for a deposit.
Rush to Complete Transactions
The budget’s impact on the broader housing market is also worth considering.
The potential rush to complete property transactions before the stamp duty threshold changes in March 2025 could create a temporary surge in activity, but it may also lead to an increase in the number of property chains falling through.
This could have a knock-on effect on first-time buyers, who may find themselves caught in the middle of these disruptions.
Tax Increases
Additionally, the tax increases, such as the rise in employer National Insurance contributions and the national minimum wage, could put pressure on small businesses and potentially affect the job market.
This, in turn, could impact the income and affordability of first-time buyers, making it more challenging for them to secure mortgages.
Next Steps to Consider
As a first-time buyer navigating this complex landscape, it’s crucial to stay informed and proactive. Here are a few steps to consider:
- Review your budget: Carefully factor in the potential changes to stamp duty, taxes, and other costs to ensure your homeownership plans remain viable.
- Stay up-to-date on mortgage offers: Monitor the market for any changes in mortgage products and rates that could benefit first-time buyers.
- Explore Shared Ownership: Consider Shared Ownership schemes as a viable option to enter the housing market with a smaller deposit.
- Act quickly, if possible: If you’re in a position to complete your purchase before the stamp duty threshold changes in March 2025, consider doing so to avoid the additional costs.
- Consult with a mortgage advisor: Seek professional guidance to understand how the budget changes may affect your specific situation and explore strategies to improve your affordability.
- Take the Mortgage Ready Quiz: If you’re a first time buyer looking at buying sooner rather than later, take the 30 second Mortgage Quiz and in eight clicks or less, discover if you’re ready to start the mortgage process.
By staying informed and taking proactive steps now, first-time buyers can seize the opportunities from the Autumn Budget while navigating it’s challenges to increase the chances of a successful property purchase.
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