The pre-budget report and comprehensive spending review were announced yesterday to mixed results.
Welcomed by the mortgage industry was the proposal to help lenders provide more long-term fixed rate mortgages. Currently about half of all homeowners are on some form of fixed rate mortgage deal but usually only in two- to three-year deals, as opposed to the US where deals of up to 25 years are popular.
The allowances for inheritance tax has been increased to £350,000 by 2017 and there are new rules to allow couples whether married, civil partners or widow/ers, to combine their inheritance tax allowances to make a total of £600,000 now rising to £700,000 by 2017. Whilst couples can do this now, it avoids having to set up elaborate trust funds.
Capital gains tax is also being overhauled and many buy to let investors, shareholders and second homeowners will see big savings from the proposal to move to a single 18 per cent rate. Currently many of these investors face a CGT rate of 24 per cent on profits when they sell. However, owners of furnished holiday lets, and many long-term property investors who lose the CGT ‘taper’ relief, may end up paying more.
First time buyers were given no help to get on the property ladder after the Chancellor opted not to increase the stamp duty threshold from £125,000. In the small print there was mention of exploring possible reforms that might allow some people who buy through the official shared equity schemes to escape paying the tax.
Some measures have also been taken to help people living in poor quality housing, and to bring empty residential properties back into use. The government has committed to spending more than £4 billion over the next three years to help those living in substandard accommodation carry out renovations. It is also extending the 5 per cent VAT rate for restoring a house which has laid empty for three years, to now be eligible on all properties that have been vacant for two or more years.
In other news, according to figures from the Council of Mortgage Lenders (CML), today’s homeowners are paying more on their monthly mortgage repayments than at any time since the property crash of 1992. The average household who took out a mortgage in August is using 18.2 per cent of its pre-tax income to pay the interest, up from 17.9 per cent in July. And first time buyers were paying 20 per cent of their pre-tax income, up from 19.7 per cent a month earlier. They also found that despite the Bank of England keeping rates on hold since July, mortgage rates have continued to climb. They are now at 5.91 per cent on average, the highest level for six and a half years.
Natural England, a government agency set up to ‘conserve and enhance the natural environment’ is considering plans to build houses in green belt land, according to the Guardian today. The best and most environmentally valuable land would be safeguarded and improved says the agency. Currently 13 per cent of land in England is made up of green belt, and the proposals aim to replace this with a ‘green infrastructure’ – a network of ‘green gaps, green wedges and buffers’ that would link urban areas to rural surrounds. The Campaign for the Protection of Rural England condemned the paper, warning it could lead to ‘American-style urbanisation’ of the countryside.