How the Autumn Statement 2023 affects your mortgage

November 24, 2023

The Chancellor of the Exchequer, Jeremy Hunt, gave his Autumn Statement on November 22, 2023.

This is a big deal, because it tells us how The Government is planning to spend our money and what taxes we have to pay, based on what the experts think the economy will do in the future.

Here are some of the main things that the Chancellor said and what they mean for mortgage borrowers and lenders.

National Insurance Changes

The main rate of National Insurance has been cut from 12% to 10%, affecting 27 million people. This means more disposable income for potential homebuyers, which could boost the housing market.

Additionally, Class 2 National Insurance, paid by self-employed people earning more than £12,570, will be abolished from April. This could potentially increase the number of self-employed individuals able to afford a mortgage.

Class 4 National Insurance for self-employed individuals, paid on profits between £12,570 and £50,270, will be cut from 9% to 8% from April. This reduction could make homeownership more affordable for self-employed individuals.

Extension of the mortgage guarantee scheme

The mortgage guarantee scheme, which started in March 2021, lets people buy a home worth up to £600,000 with only a 5% deposit. The scheme was supposed to end in December 2023, but the Chancellor said that it will carry on for another 18 months until June 2025.

This is fantastic news for first-time buyers and those with small deposits, because it means they can still get mortgages with lower interest rates and fees than they would normally have to pay.

The scheme also helps lenders, because The Government promises to pay them back some of the money if the borrower can’t pay their mortgage. The Treasury thinks that the scheme will help around 100,000 more people buy their own home.

Reform of the ISA system

The Chancellor also said that he wants to change the ISA system, which could affect how people save and invest for their mortgage deposit. The current system lets people save up to £20,000 a year without paying any tax, but they can only put money into one of each kind of ISA every tax year. There are six kinds of ISA to choose from, and they all have different rules and goals.

The new system, which will start from April 2024, will make the ISA system simpler and let people have both stocks and cash in one ISA account. This could make it easier for people to save and invest for their mortgage deposit, because they will have more freedom and options over how they use their ISA money.

The Chancellor also said that he is thinking about making a new kind of ISA that will help first-time buyers buy their own home. We don’t know much about this new ISA yet, but it might be like the Lifetime ISA (LISA), which gives you a 25% bonus from The Government on up to £4,000 of savings a year, as long as you use the money to buy your first home or for retirement.

But the Chancellor didn’t say anything about changing the LISA itself, which means that you can only use it to buy a home worth up to £450,000 and you have to be under 40 to open one.

Falling Base Rates

In addition to the Autumn Statement, the forecast for falling base rates is another positive news for the mortgage industry. Some economists predict that the base rate will start to fall next year, as inflation cools down and growth picks up.

We are already seeing mortgage rates decreasing, making it cheaper and easier to get a mortgage. This could be especially beneficial for first-time buyers, who typically need a larger deposit and have less equity in their property.

Other announcements

The Autumn Statement also had some other things that could affect mortgages, such as:

A cut in the basic rate of income tax from 20% to 19% from April 2024, which could give some mortgage borrowers more money to spend and help them pay their mortgage.
A freeze in the pensions lifetime allowance at £1,073,100 until April 2026, which could stop some people from saving more into their pensions and make them invest in property instead.
A rise in the national living wage from £10.42 to £11.44 an hour from April 2024, which could make mortgages more affordable for some low-paid workers.

Implications for the Mortgage Industry

These changes could have a significant impact on the mortgage industry. With more disposable income, potential homebuyers may be able to afford larger mortgages or higher repayments. This could lead to an increase in mortgage applications and approvals, boosting the housing market.

For mortgage lenders, the changes could result in a larger pool of potential borrowers. This could increase competition in the mortgage market, potentially leading to lower interest rates and more attractive mortgage products.

Conclusion

The Autumn Statement 2023 had some good news for mortgage borrowers and lenders, especially the extension of the mortgage guarantee scheme and the change of the ISA system.

At Newhomes, we want to help you find the most suitable mortgage deal for you, whether you are a first-time buyer, a home mover, or a remortgage.

We can look at 72 different lenders and products, and we can give you expert advice and help you all the way.