Although the budget was dominated by the Coronavirus, it actually contained a much broader range of content.
With the situation as it is, some of this may change, but here is a quick guide to what it means for mortgages and property.
Interest rates have been cut from 0.75% to 0.25% (and have since been cut again to 0.1%)
Strictly speaking, this decision was taken by the monetary policy committee of the Bank of England, rather than the Chancellor Rishi Sunak, but the announcement was made on the same day and also influenced by the “economic shock” caused by the Coronavirus. This decision obviously has implications for mortgages and property, but as yet it’s unclear what they will be.
On the face of it, cutting interest rates should be good for borrowers, which includes anyone who has a mortgage and, in principle, should add stimulus to the property market. Certainly, anyone who currently has a tracker mortgage should see their repayments go down per their lender’s schedule for implementing changes to the rate charged. Fixed-rate mortgages, however, will stay as they are, basically, that’s the gamble you take with them.
In principle, if you already have a fixed-rate mortgage then you could take this as an opportunity to take out another fixed-rate deal. In practice, however, this may not be as straightforward as it sounds. First of all, it’s anyone’s guess how long this rate will last, which means that lenders are likely to take a cautious approach to offering fixed-rate mortgages at a rate which could leave them very exposed when interest rates go up. Secondly, you would have to go through the full remortgaging process.
Low-interest rates can feed into high inflation
If low-interest rates weaken the Pound, then imports will become more expensive. This could lead to higher prices for key consumer products, including food.
In principle, a weak pound could benefit exporters and the inbound tourism industry, but in practice, the Coronavirus (plus Brexit) could negate them.
High inflation is not necessarily totally bad news for homeowners, especially when it occurs alongside low-interest rates. If it increases the paper value of a property, it may make it easier for homeowners to remortgage at more attractive rates (or to get a better deal on equity release) but this, of course, does assume that the borrower’s own financial circumstances are good. In other words, that they meet the affordability criteria and can realistically service their mortgage.
There is a commitment to spending on infrastructure
Although HS2 was given the go-ahead before the budget, Chancellor Rishi Sunak had plenty of other infrastructure announcements to make. Probably the headline announcement is that he will commit £600bn to the improvement of roads, rail, broadband and housing by the middle of 2025. There will be a £1bn fund to remove all unsafe combustible cladding from all public and private housing higher than 18 metres. This has been dubbed the “Grenfell fund” and while some might criticize the government for taking so long, at least it has acted now, so credit where it is due.
There will also be £27bn for motorways and other arterial roads, including a new tunnel for the A303 near Stonehenge and £2.5bn to fix potholes and resurface roads in England over five years. Infrastructure improvements tend to boost the value of property in the vicinity, so all this is likely to be good news for homeowners. Property owners in rural areas may be particularly happy to hear that the Chancellor has committed £5bn to getting gigabit-capable broadband into the hardest-to-reach places.
There will be a 2% stamp duty surcharge on international property buyers
As of April 2021, anyone not domiciled in the UK will pay an extra 2% stamp duty if they buy a property in England or NI.
Your property may be repossessed if you do not keep up repayments on your mortgage