This week’s updates: mini budget and base rate increase 23 Sep 2022
We’ve seen plenty of updates that affect the property market this week, with the base interest rate being increased again yesterday, and the mini budget being announced today. The new Chancellor of the Exchequer, Kwasi Kwarteng, led the announcement by hailing it “the beginning of a new era”. We’ve rounded up below the key things you should know.
Stamp duty cuts
Stamp duty is to be cut from today. Nothing will be paid for the first £250,000 of property’s value – double the current amount allowed at £125,000. If you’re looking to move home, you could now save thousands of pounds.
The threshold for first-time buyers is to be increased from £300,000 to £425,000. Meanwhile if you’re a first time buyer purchasing a property above this price, you can now claim relief up to £625,000, up from £500,000.
If you’re a first time buyer, this will definitely help you make your first step onto the property ladder easier to afford and overall the changes should remove 200,000 people from paying stamp duty.
Kevin Shaw, Group Managing Director Sales, said: “Following the rise in interest rates over the last few months, home movers and the property industry will all welcome the reduction in stamp duty announced today. This will soften the impact of rising mortgage rates and also lower the fixed costs of moving. It is also really important this is a tax change, not a Stamp Duty Holiday which would only have served to further distort the housing market. This will also give an injection of confidence at just the right time.”
Base rate increases to 2.25%
The Bank of England has announced a 0.5% increase to the interest rate, taking it to 2.25%, the highest it has been for 14 years.
Sarah Thompson, Managing Director of our sister company Mortgage Scout, explained: “As anticipated, the Bank of England have increased interest rates. The good news is the majority of us are currently on fixed rates. If you’re not on fixed rates or you are concerned about what your rate would look like in six months, then please go to our website where we have a 24 hour live feed which shows you which interest rates are currently available. Please bear in mind that currently on average, interest rates are staying on the books, on the shelves, of the bank and building societies for 17 days before they are being withdrawn.”
Help with household bills
Household bills are to be cut by an expected £1,400 this year with aid from energy price guarantees and a £400 grant. Millions of the most vulnerable households will receive additional payments, taking their total savings this year to £2,200.
The total cost of the energy package, including business support, over the next six months is estimated at £60bn. The Chancellor said it is “entirely appropriate for the Government to use our borrowing powers to fund temporary measures to support families and businesses”.
Changes to take home pay
The basic rate of income tax will be cut from 20% to 19% on 1 April next year. It was already announced prior to this mini budget that April’s National Insurance hike introduced previously by Rishi Sunak is to be reversed from 6 November – saving money for businesses and 28 million workers.
From next April the 45% top rate of tax (applies to those earning £150,000) will be scrapped, so the top rate will be the 40% higher rate threshold.