What the Autumn Statement 2023 means for the housing market

40,000 new homes to be built, 95% mortgage guarantee scheme extended, and Local Housing Allowance unfrozen.

After today's Autumn Statement, the housing market did not experience any major surprises.

There were rumors that stamp duty would be cut to kick start the market, but that did not happen. But buried in the details was news of an extension of the current mortgage guarantee scheme. 

For buyers with a 5% deposit, the scheme encourages lenders to offer 95% loan-to-value (LTV) mortgages.

Government-backed mortgages are issued under the scheme, so if a borrower defaults, the government will cover some of the shortfall.  

Originally due to end in December, the scheme will now run until the end of June 2025 in order to help prospective homebuyers with smaller deposits.

Richard Donnell, Executive Director at Zoopla comments: “First-time buyers continue to be a key engine for the housing market - however they have to rely on the Bank of Mum and Dad.

'Although first-time buyers get a lot of support through stamp duty relief, the big hurdles remain having the income needed to afford a mortgage alongside raising a deposit. 

'Extending the mortgage guarantee will help some buyers struggling to borrow for their first property.'

In the last two years since the scheme started in April 2021, it has been used to help 37,800 households, 86% of whom are first-time buyers.

A mortgage will be used by around 5% of first-time buyers between April 2021 and May 2023. 

In contrast, the Help to Buy equity loan scheme has helped 387,200 buyers since it began a decade ago, 85% of whom were first-time buyers. Approximately one out of ten first-time homebuyers received help from this program. 

'With this in mind, the key to the extension of the Mortgage Guarantee Scheme will be improving its affordability and appeal,' said Donnell.

Increasing the national living wage and reducing national insurance

In addition to boosting household income, the Chancellor also stressed the importance of improving housing affordability.

In addition to raising the National Living Wage, both employees and self-employed individuals will benefit from a reduction in National Insurance. 

Due to the ongoing cost-of-living crisis, many households will welcome this news.

Property transaction levels and house prices have fallen due to this, coupled with high mortgage rates.

The inflation rate is expected to reach 2% in 2025

Mortgage rates might also fall faster than expected in 2024, as the Bank of England predicts inflation will fall to its target in the first half of 2025. House sales could also increase if this occurs. 

'The most important focus for the Government should be deploying policies that help support the reduction in borrowing costs for all buyer groups,' says Donnell.

'This needs to be supported by boosting housing supply through new house building and more support for affordable housing schemes to help those on all incomes.'

New homes supply to be boosted by £110m

Building 40,000 new homes and increasing supply is the Chancellor's priority this year and next.

Cambridge, London, and Leeds will receive £32 million to 'bust the planning backlog' and develop new housing.

To build around 2,400 new homes, the Local Authority Housing Fund will receive an additional £450 million. 

For low-income renters, the Local Housing Allowance rate has been unfrozen

In rental news, the Local Housing Allowance rate will increase after being frozen since 2020, affecting how much help you get from private landlords.

Next year, an average of £800 will be provided to 1.6 million households struggling to afford rising rents.