(qlmbusinessnews.com Tues, 25th Oct, 2023) London, UK —
Government Weighs Further Support for First-Time Buyers in Autumn Statement.
The UK government is reportedly contemplating an extension of its mortgage guarantee scheme as part of its upcoming Autumn Statement, aimed at assisting first-time homebuyers. This initiative, designed to facilitate mortgage access for individuals with a 5% deposit, may be extended for another year. Chancellor Jeremy Hunt will unveil the Autumn Statement on November 22, following the Conservative Party's loss of two by-elections to Labour.
The scheme, originally introduced by former Chancellor Rishi Sunak in March 2021, was developed to incentivize lenders to provide mortgages to those with smaller deposits. Since then, the interest rate has risen from its historic low to the current 5.25%, as the Bank of England sought to combat high inflation.
The increase in interest rates has translated into higher mortgage costs for borrowers at a time when many are grappling with increased living expenses. Recent figures from financial information service Moneyfacts reveal that the average rate for a five-year fixed mortgage has decreased to 5.99%, while a two-year fixed mortgage now carries a 6.5% rate.
The mortgage guarantee scheme was previously extended for 12 months and is slated to end in December. However, the Treasury is reportedly mulling over the idea of prolonging its availability for another year.
This initiative is part of a broader package of measures being explored by the Treasury to support individuals in their quest to enter the property market. According to reports, a new Individual Savings Account (ISA) is under consideration, intended to encourage prospective homebuyers to save for their first house.
Previous ISAs, like Help to Buy, which was initiated in 2015 under former Chancellor George Osborne and concluded on March 31, have faced criticism as house prices surpassed the scheme's price ceiling. Under its guidelines, buyers received a 25% government bonus on homes valued up to £250,000 in England and £450,000 in London.
Mr. Hunt is also contemplating an increase in the £450,000 upper limit on house purchases funded by a Lifetime ISA, which features a 25% government contribution to savings designated for building a deposit.
Average UK property prices reached £278,601 in September, with London properties averaging £525,678. The final decisions will depend on official financial forecasts.
The government's recent electoral setbacks have prompted some Conservatives to advocate for tax reductions to shore up support. Immigration Minister Robert Jenrick stated that the government would consider tax cuts if it achieves its target of halving inflation by year-end. However, he emphasized the need to tackle inflation first.
Last week, data revealed that inflation remained at 6.7% in September, consistent with August figures. Nonetheless, Andrew Bailey, the Bank of England's governor, has predicted a “noticeable drop” in October's inflation data when it is published next month.
The Bank of England is scheduled to announce its latest interest rate decision on November 2. Mr. Jenrick stated that if inflation is effectively managed, the government will consider further tax-related measures.
A Labour spokesperson responded, saying that home ownership aspirations have dwindled for many during the 13 years of Conservative government. Labour has proposed transformative reforms to the planning system, aiming to build 1.5 million new homes during the next parliamentary term and introducing measures to facilitate first-time buyers in entering the housing market.
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