On Friday, Kwasi Kwarteng ‒ the new Chancellor of the Exchequer ‒ is set to deliver what is effectively a mini-Budget.
And brokers told Mortgage Solutions that this is the perfect opportunity to outline ways to keep inflation low while supporting greater levels of housebuilding, as well as to row back on some of the punitive tax changes landlords have faced in recent years.
1. Getting inflation under control
Lewis Shaw, founder of Shaw Financial Services, said that homeowners need to know the plan to get inflation under control, and therefore stop the “continued march” of base rate increases.
He added that they will need to know where the funding will come from for this winter: “The British people need a new settlement that addresses inequality and overhauls our broken tax system and economy.”
Andy Wilson, director of Andy Wilson Financial Services, said that we are in the midst of a “perfect storm”, with soaring energy costs and inflation affecting the price of just about everything which hurts mortgage affordability.
He continued: “Those looking for a new mortgage will inevitably be affected by tighter lender restrictions on what they can borrow. Previous affordability restrictions have been eased, but in my opinion that was a mistake, and many lenders agree. Tax cuts will ease affordability pressures for mortgage holders, but in the long term, tax cuts will further increase inflationary pressures, pushing the prices of everything further upwards.”
Wilson said that it was important the government did not introduce any “knee-jerk efforts” to boost the mortgage market, which only put applicants into a difficult financial situation.
“If we are to genuinely treat customers fairly, we need to manage their expectations and guide them on how to afford their mortgage in the face of upward pressures on their expenditure,” he added.
2. Giving buyers a helping hand
Mark Robinson, managing director at Albion Forest Mortgages, said it would be welcome for the government to introduce a no negative equity guarantee for lenders, in order to encourage them to offer 100 per cent loan-to-value mortgages.
He continued: “This could even be on new build properties to help bolster the new build sector. The biggest barrier for entry for most people is saving very large deposits while paying equally high rents. With more and more landlords selling up, there are fewer rental properties available and we will reach a crunch point eventually.”
3. Building more homes
Graham Cox, director of SelfEmployedMortgageHub.com, called on the Chancellor to provide local authorities with the ability to finance a large increase in quality social housing, arguing “we need to get building”.
He added: “Rents are extortionate, and councils need to take up the slack as private landlords abandon the sector. I’d also abolish Right to Buy. It’s been a disaster, as there’s been no incentive to replace housing stock.
“Modular housing built off-site could be a big part of the solution. It’s fast to build, economical, good quality and drastically cuts emissions. So I’d introduce tax breaks for that type of building company to provide some much-needed competition for legacy house builders.”
Cox also called for taxes to be increased significantly for developers who hoard land without building on it, second homeowners, foreign buyers and owners of unoccupied property in order to push property prices lower.
“If we can sensibly lower property prices in real terms over a period of time, it would benefit everyone. The current madness is not sustainable,” he concluded.
4. Doing more to help landlords
According to Mark Hood, mortgage and protection adviser at Warners Financial Services, it is important for the government to look afresh at the rental sector, which he argued was “in crisis”.
“Following the consistent battering this Government has given landlords, they are now leaving the sector in increasing numbers. Add to that huge hikes in mortgage costs for landlords as they gradually come off of low fixed rates and their option seems to be to sell up or increase rents even further.”
Hood warned that tenants are losing out here, through rent rises and a lack of available housing, arguing that the only way to reverse this trend was to reinstate the tax relief for landlords.
Jane King, mortgage adviser at Ash Ridge Private Finance, agreed that it would be welcome to see some tax relief for landlords, suggesting they had been “unduly clobbered tax wise”.
“We have a real shortage of property to rent and this would encourage more landlords back into buying property for tenants. Of course, I would like to see another stamp duty holiday, if it cannot be abolished altogether.”
5. Leaving corporation tax alone
The biggest way that the government can support businesses is by keeping corporation tax at its current level, according to James McGregor, director at Mesa Financial.
McGregor said that he would personally reduce it “but let’s be realistic here”.
He continued: “If they put a cap on any future raise for three years, this would allow businesses to plan effectively and re-invest the excess cash back into their businesses. Having a low corporation tax rate would also make the UK extremely attractive for outside investment which is much needed at the moment.”
