Autumn Statement 2023: implications for the housing market

Extension to the Mortgage Guarantee Scheme

The Mortgage Guarantee Scheme encourages lenders to offer 95% loan-to-value mortgages to borrowers with a 5% deposit. It was due to end in December 2023 but has been extended to the end of June 2025.

The scheme predominantly helps first-time buyers, who are less likely to have a large deposit. Since the scheme started in 2021 it has helped 37,800 households, 86% of which are first-time buyers.

First-time buyers are a key source fuelling the housing market so the extension of the scheme will ensure this continues.

Increase in Local Housing Allowance

To further support low-income households with increasing rent costs, the government will raise Local Housing Allowance rates to the 30th percentile of local market rents in April 2024. This will benefit 1.6 million low-income households, who will be around £800 a year better off on average in 2024-25.

Funding for more homes

The Chancellor confirmed that £110 million will be made available to local authorities, which will boost housing supply by building 40,000 new homes.

New permitted development right

The government is investing an additional £32 million across housing and planning to unlock thousands of homes across the country. This includes additional funding to tackle planning backlogs in Local Planning Authorities (LPA), alongside further reforms to streamline the system through a new Permitted Development Right to enable one house to be converted into two homes.

Wages increases and inflation

Combined, the National Living Wage increase and the cut in National Insurance will increase household income, thereby improving housing affordability.

The Bank of England has predicted that inflation will drop to its 2% target in the first half of 2025. This means that mortgage rates are predicted to drop throughout 2024. If these predictions are correct, we are likely to see an increase in both the number of house sales and house prices next year.

Energy efficiency in rental properties

According to the 2021 Greenhouse Gas Emissions study, 16% of the UK’s carbon emissions arise from our homes. This is blamed on the fact that the UK has some of the oldest homes in the world and the worst insulated in Europe!

By 2050, the UK is legally required to have reduced its greenhouse gas emissions by 100% from its 1990 levels. One of the ways the government intends to do this is through the Energy Performance Certificate (EPC) system. Already, most privately-rented properties cannot be let unless they have an EPC rating of ‘E’ or better.

Government proposals were that new private rentals would require an EPC of ‘C’ or better from 2025. Existing rentals would require the ‘C’ rating from 2028. In September 2023, the government announced that these proposals would be scrapped.

Nevertheless, there are benefits for landlords who make their properties more energy efficient. Not only does having an energy-efficient home reduce the risk of receiving penalties, but it makes the home more attractive to a market of renters who are becoming more and more eco-aware.

The key ways of improving a home’s energy efficiency are:

• Resolving damp issues;
• Making the property airtight;
• Insulating the loft, walls and floors; and
• Installing eco-friendly heating systems and appliances.

Scotland: Heat in Buildings Strategy

The Scottish Government published its Heat in Buildings Bill for consultation on 28 November 2023. The Bill will ensure that a minimum energy efficiency standard for homes will be set. The standard must be met by private landlords from 2028 and owner-occupiers from 2033. The bill also allows for penalties in the case of non-compliance with the standards.

A more energy-efficient property may be more attractive to tenants, but there are concerns that the costs of making properties more energy efficient (e.g. installing heat pumps) will have a negative effect on the private rented sector, which accounts for 15% of Scotland’s housing.

Brighter outlook for rental market

The Zoopla Rental Market Report for December 2023 comments that the average rent for new lets has increased by 9.7% since a year ago, but expects rents to increase by just 5% in 2024, as the market starts to cool. Rents are reaching the maximum affordable price and rental demand is starting to slow.

Rents in London are predicted to increase just 2% next year, with renters unable to afford any further jump to already sky-high rents.