The Spring Statement is due at around midday tomorrow and the Office for Budget Responsibility will release its economic and fiscal forecasts.
In the statement, Sunak typically provides an update on the performance of the economy and usually does not include major tax or spending changes of the budget.
However, the Chancellor is facing increased pressure to fight the rising cost of living, with financial adviser Hargeaves Lansdown calling on the government to delay the proposed 1.25 per cent hike in National Insurance.
It also advocated an increase in Universal Credit from 2.1 per cent already reserved and a reduction to fuel duty and/or VAT.
Ahead of the statement, Mortgage Solutions asked the mortgage sector what it would do if they were Chancellor, what they think he would announce and what he could do to further support the market.
What would you do if you were Chancellor?
Jonathan Stinton, head of intermediary relationships at Coventry for intermediaries, said if he was Chancellor he would put “green issues on the top of [his] agenda”.
He said he would “fulfill the promises” in the Conservative manifesto around the Home Upgrade Grant, which aims to help low income household in worse performing off-gas-grid homes in England to become more energy efficient.
He said he would further back the Social Housing Decarbonisation fund, which was allocated £800m last year.
Stinton said he would also alleviate some of the burden posed by National Insurance increase and rising energy costs. He suggested that one way to relieve the cost of living could be a temporary fuel duty break.
Vikki Jefferies, proposition director of the Primis Mortgage Network, said the focus should be on supporting households in what is “financially one of the toughest years many will have ever seen in a long time”.
She added: “The squeeze individuals are seeing on their outgoings is unprecedented and it effects all kinds of borrowers, so helping them weather this uncertain time is vital. Putting in place policies to help families meet the rising cost of living by freezing duties, cutting the tax rate in universal credit, and increasing the national living wage will certainly help.
“The previous focus the Chancellor had on the housing market during the pandemic really helped the sector, so a continued emphasis on it would be very welcomed.”
What do you think Rishi Sunak will announce?
Stinton said it was unlikely Sunak would make any “drastic changes”, but it would be interesting if he took the opportunity to reaffirm the commitment to the green agenda.
He added that there had been debate as to whether the Chancellor would progress with the National Insurance hike. However, he thought it would be unlikely for the government to make a policy U-turn so expected the rise to go ahead.
Jefferies agreed and said Sunak would probably have a “large focus” on green initiatives, partially due to the UK’s attempt to reduce the use of Russian oil.
She added: “We are likely to see more investment in renewable power, but this could be announced separately to the Spring budget. We would welcome more support for green initiatives in the housing sector too.”
She expected Sunak to focus on relief and support for low income households to help them manage increased financial strain.
She said: “Inflation is at its highest levels in the last 30 years and interest rates are rising. It’s likely that the Chancellor’s hands will be tied in terms of doing anything truly radical, but he may look to make the energy bill rebate more generous.
“That would go some way to helping families struggling with rising household costs.”
Zarah Gulfraz, sales manager at Mojo Mortgages, said addressing the cost of living crisis was the “best thing” Sunak could do to support the mortgage market as this would have an impact on homeowners and first-time buyers.
However, she also did not expect any major announcements for the sector as the return to normal stamp duty rates “did little to slow the housing market” so “any further intervention would be a surprise”.
Chris Sykes, associate director and mortgage consultant at Private Finance, said this year’s Spring statement was another “exercise in crisis management” like last year.
“This statement will therefore focus on taking the pressure off household finances as much as possible. This will inadvertently help prospective purchasers and borrowers, as any help in this regard will have an impact on affordability, which for many people is becoming increasingly constrained especially given the quickly rising interest rate environment,” he added.
He also predicted there would be no stimulants for the mortgage and housing sectors but coveted an incentive to “help older homeowners downsize, freeing up housing stock for younger families looking to move up the ladder and helping older homeowners reduce their bills”.
Additionally, he suggested a stamp duty incentive to encourage the purchase of sustainable homes and reward retrofitting.
What other changes should be made to support the mortgage market?
Stinton said he would like to see incentives for borrowers to accelerate the green agenda.
He said: “As a nation, we still rely on imported oil and gas, but the introduction of subsidies for improving energy efficiency and making green home improvements could be a significant step in the right direction to independence from fossil fuels.
“With the changing EPC regulation coming into force, more incentives for landlords to improve the energy ratings of the properties in their buy-to-let portfolios will ultimately support the private rental sector. It could both reduce the likelihood of landlords passing costs to tenants and also help to reduce the living costs of those in rented accommodation.”
Jefferies agreed that more needed to be done to support homeowners wanting to improve their EPC rating.
She said: “With many suggesting that the measures to do so are too expensive to even consider, more in the way of government support is needed. The deadlines set to reach an average EPC rating of C will creep up on us quickly, so the more that can be done now to help homeowners the better.”
Stinton added that tax exemptions for homeowners and landlords could also work and suggested a reform of stamp duty to link it to sustainable home upgrades where new homeowners who made changes in the first few years of purchase would get a portion of it back.
He said there should also be an emphasis on urban regeneration and social housing to help the property shortage.
“This could be achieved, for example, by converting unused office buildings into homes which could help to rejuvenate town and city centres,” Stinton noted.
He added that there should be a focus on housing affordability, with one example he cited was the introduction of stamp duty relief for downsizers similar to that offered to first-time buyers.
“This would help to free up more properties for growing families to move up the ladder, and thereby provide more choice of first homes for those looking to step into homeownership,” Stinton said.
Jefferies added that she wanted to see more options available to replace the Help to Buy scheme, which is due to expire next year.
Mark Harris, chief executive of SPF Private Clients, said the Chancellor should prioritise “sorting out the cladding crisis once and for all”.
He added: “For far too long, far too many flat owners have been trapped, unable to sell or move, through no fault of their own. The bills for proposed remedial work which some leaseholders have received are eye-watering and it’s a disgrace that they are expected to foot the bill.”
Gulfraz agreed this should be addressed as she said cladding had become a “pressing issue”.
Harris said affordability would only become “more of an issue” as property price growth continues to outpace wages.
“It is hugely worrying that capital cities such as London are becoming beyond the means of your average first-time buyer, unless they have significant financial help from the Bank of Mum and Dad,” he said.
He added that removing the stress test for mortgage borrowers would help, but as first-time buyers were the “lifeblood of the market”, stamp duty reductions and other incentives would be “necessary to boost the sector”.
Harris continued that a “detailed review” of the stamp duty system would be welcome to evaluate how well it was working and whether large family homes could be freed up.
He explained that stamp duty costs were a barrier for those moving up the ladder, those downsizing, and could put off elderly people from doing so.
“The stamp duty holiday proved to be such a boost for the housing market; surely the Chancellor needs to look at it again?” he said.
Brian Murphy, head of lending at Mortgage Advice Bureau, said stamp duty had been a “major focal part” of the UK housing market for years.
He said in hindsight the housing market was already in “good health” despite the pandemic and the stimulus of the stamp duty holiday resulted in a significant increase in housing transactions and stamp duty revenue relative to previous years.
Murphy added: “This appears to demonstrate that the structure of the current stamp duty system is not fit for purpose as by suspending parts of it for a finite period has clearly motivated more buyers to move but not at the expense of the Treasury coffers.
“This suggests that now is the perfect time to consider a route and branch review of the current stamp duty system, to encourage people that want to move to do so without fear of taxation issues that have for so long held the market back.”
