28 March 2022
Spring Statement – what does it mean for mortgages?
The soaring cost of living, particularly when it comes to energy bills and fuel prices, was the focus of the Chancellor’s Spring Statement. With inflation rising up to 6.2 per cent in February, the highest level since March 1992, the squeeze on living standards is set to make for an uncomfortable few months at least for many families.
Rishi Sunak went ahead with his planned rise in National Insurance which he announced last Autumn but increased the threshold for contributions to £12,570, the same level as income tax. He also said he would cut the basic rate of income tax by 1p by the end of this Parliament in 2024.
There was very little which directly impacted the housing market, apart from a reduction in VAT on the installation of energy-saving materials such as solar panels and heat pumps in residential properties. This was reduced from 5 per cent to zero for the next five years.
Mr Sunak also announced that £500m would be put into the Household Support Fund, doubling its total amount to £1 billion to support the most vulnerable families with essential spending over the coming months.
Given the lack of direct policies or initiatives affecting the housing market, many in the industry would have given a huge sigh of relief. The housing market continues to perform strongly, with prices continuing to rise due to lack of stock, according to the latest figures from the Office for National Statistics. There are plenty of buyers who didn’t make their move last year and are still keen to do so, assuming they can find the right property. Following three interest rate rises, there is also a desire to take advantage of mortgage rates while they remain low.
Some heat has come out of the purchase market compared with last year but the remortgaging market is picking up as borrowers attempt to lock into fixed-rate deals. Although the super low sub-1 per cent rates we saw last autumn are no longer available, it is still possible to fix for two or five years for less than 2 per cent, which is still relatively cheap. Those looking for a mortgage in coming months should plan ahead and consult a whole-of-market broker – mortgage rates can be booked several months before you need one, depending on the lender, so it is well worth planning ahead and booking a competitive deal now.