Stamp Duty cut for homebuyers as BoE raise interest rates by 0.5% to 2.5% and say the UK “may” already be in recession

The Chancellor Kwasi Kwarteng has cut Stamp Duty for 200,000 homebuyers to stimulate the property market a day after the Bank of England (BoE) has raised the UK base interest rate from 1.75% to 2.25% to combat inflation and warning that the country “may” already be in recession. A recession is officially measured by two negative growth quarters, which has not yet been recorded.

The independent BoE move follows the Federal Reserve’s 0.75% hike this week.

UK borrowing costs are now at their highest levels since 2008 putting pressure on mortgage holders and the housing market.

The new rate rise alone could add up to £690 per annum or £57 per month to an average variable rate mortgage (on top of previous rate rises), although not all lenders follow the BoE base rates.

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How high will interest rates go?

The Bank of England’s Monetary Policy Committee (MPC) meets in less than two week on 3 November and could be forced to raise rates again. The markets expects rates to rise to 4.5% by next year, which could push mortgage rates to over 7%, a level I have not seen for 20 years.

Now could be the time to get advice from a broker about fixing your mortgage rate for at least 3-5 years.

Stamp Duty Cut

· Threshold raised from £125,000 to £250,000.

· First-time buyer nil rate band lifted to £425,000.

· 200,000 people will be taken out of Stamp Duty tax altogether.

The April NI tax rise has been reversed saving employees and employers hundreds of pounds a year.

Income tax reduced to 19% from April 2023 giving back £170 to 31 million people.

Highest rate of 45% abolished.

All goo d news but more money is effectively being printed and the national debt increased or deferred, which means paper currency is being devalued.

Corporation tax rise cancelled.

Bad news for HMO Landlords

The government plans to introduce legislation to force landlords who include bills as part of the rent to “repay” the £400 rebate to the tenant!

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