The Autumn Statement 2023 brings several key updates for the UK housing market, including the extension of the 95% mortgage guarantee scheme, a significant investment in new home development, and enhanced support for renters.

Highlights of the Housing Market Update

• Extension of the Mortgage Guarantee Scheme: Initially set to end in December 2023, this scheme will now continue until June 2025. It aims to assist buyers with smaller deposits, primarily first-time buyers, by offering 95% loan-to-value (LTV) mortgages. The Government backs these mortgages, stepping in to cover part of the shortfall if a buyer defaults.
• Investment in New Homes: The Chancellor has committed £110 million for this and the next year to facilitate the construction of 40,000 new properties, a move aimed at boosting housing supply.
• Support for Renters: The freeze on the Local Housing Allowance Funds has been lifted, providing an average of £800 in support for rental costs to 1.6 million households next year.

Economic Measures and Their Impact

The Chancellor's statement also included an increase in the National Living Wage and a cut in National Insurance, potentially easing household budgets amidst the cost-of-living crisis. These measures, coupled with high mortgage rates, could influence first-time buyers and home movers, impacting property transactions and house prices.

Projections and Policies

With the Bank of England forecasting inflation to hit its 2% target in the first half of 2025, there's an expectation that mortgage rates might decrease sooner than anticipated, possibly leading to a rise in house sales in 2024. Donnell emphasises the need for policies that reduce borrowing costs across all buyer groups, alongside boosting housing supply and supporting affordable housing schemes.

Boosting Housing Supply

The Chancellor's commitment to investing in house building and planning applications aims to address the housing supply issue. Over £110 million is earmarked for building 40,000 new homes, with an additional £32 million to tackle the planning backlog in key cities. The Local Authority Housing Fund will receive an extra £450 million to build around 2,400 new homes.

Moreover, a new permitted development right is being considered, allowing homes to be converted into two flats, provided the exterior remains unchanged.

Support for Low-Income Renters

The unfreezing of the Local Housing Allowance rate, which had been stagnant since 2020, is a significant development for renters, particularly those on lower incomes. This adjustment is expected to aid families struggling with rising rents, offering substantial financial support next year.

For more details on how these changes might affect your household budget, refer to our comprehensive analysis: "What does Jeremy Hunt’s Autumn Statement 2023 mean for household budgets?"

Consultation on Housing Development Rights

The Autumn Statement also touches on housing development rights. The proposed consultation on permitting the conversion of any home into two flats, while maintaining the external appearance, is a potential game-changer. This move could significantly increase the housing stock, particularly in urban areas, and offer more options for those looking to enter the housing market.

The Broader Impact on the Housing Market

The collective impact of these measures from the Autumn Statement 2023 is multi-faceted. By extending the mortgage guarantee scheme, the government aims to sustain the momentum for first-time buyers, who are crucial drivers of the housing market. This extension could be particularly beneficial given the current economic climate where saving for a large deposit is increasingly challenging.

The significant investment in new housing development and planning reforms is expected to ease some of the supply pressures. With the construction of 40,000 new homes on the horizon, this could lead to a more balanced market, potentially stabilising prices in the long term.

The lift on the Local Housing Allowance freeze comes as a relief to many renters facing the brunt of the housing affordability crisis. By increasing this allowance, the government is acknowledging the need for greater support for those in the private rental sector, especially as rental prices continue to climb.

Conclusion

The Autumn Statement 2023 indicates a clear focus on bolstering the housing market, with particular attention to supporting first-time buyers, increasing the housing supply, and providing much-needed relief to renters. These measures, taken together, represent a significant step towards addressing some of the most pressing challenges in the UK housing market.