Budget headlines are not often upstaged, but the announcement by the Bank of England on the morning of the 11th March that it was cutting Bank Base Rate (BBR) by 0.5% along with a series of measures designed to help financial institutions provide loans to businesses and consumers, certainly took some of the spotlight away from Rishi Sunak’s first Budget presentation as Chancellor.
From a housing and mortgage market perspective, it was always likely to be the MPC announcement which held greater interest, especially after seeing the relevant announcements made within the Budget, none of which could be described as significant for our industry: despite it being described by some as the ‘biggest budget giveaway since 1992’.
The big issue for our sector looks to be stamp duty as we wait to see whether the Government is going to use it to stimulate the housing market. However, given the overwhelming focus on the coronavirus, and supporting the UK economy and businesses given the nature of the threat, it would have been surprising to see a major stamp duty announcement made.
And so it came to pass. The Chancellor did confirm that overseas, non-resident purchasers of property within the UK would pay a 2% surcharge from April next year, however the highly-anticipated changes of just a couple of months ago did not materialise. There was no cut to stamp duty below £500k or above £1m as Boris Johnson seemed to suggest was imminent not too long ago – a lot has changed in a relatively short space of time.
Will that 2% surcharge have a major impact? Unlikely in my view, although stamp duty deadlines do tend to mean increased activity in the lead up – as we saw when the 3% surcharge was introduced for additional property purchases – and we could well see more transactions taking place before next April, especially if UK bricks and mortar looks a steady investment compared to other asset classes.
Certainly, popular locations for overseas purchasers such as London might well benefit from a short-term boost in activity, but it’s unlikely to change much across the rest of the country.
In fact, some might actually baulk at the 2% rate, given that landlords, for example, will continue to pay more than non-residents when purchasing. Perhaps it too could be reduced to a 2% level at the next Budget but for those who would like to see it removed altogether, I’m afraid this doesn’t seem likely.
The bigger news for our market was clearly around the emergency cut to BBR, how lenders might react to this and whether the mortgage availability – and the incentives the Bank of England are providing to financial institutions – will provide the stronger foundation to the UK economy that the Bank is hoping it will. While the threat of coronavirus is unique, it’s not the first time we’ve seen the Bank take such action in modern times; just a decade ago it delivered very similar interventions around the time of the Credit Crunch.
Clearly, this is rightly designed to instil confidence and to insulate the economy and, along with the package of measures for employees and firms within the Budget itself, we must hope that everything is now being put in place to minimise any economic hit. I’m sure small to medium-sized firms – of course there are many in the mortgage advice market – will absolutely welcome the grants available and the taxpayer guarantees on loans, plus the refunds available on two weeks of statutory sick pay. All seem eminently sensible, especially at a time when many business owners will be worried about how they might cope should the virus mean they have staff off work, and they’re under pressure to go on delivering their normal service offering. Hopefully, brokers already have contingency plans to cope with this and we are certainly encouraging Stonebridge AR firms and advisers to ensure they have a plan in place.
When we look back at this moment in history, the 11th March might well be seen as a turning point in how the Government and Bank attacked the economic threats posed by coronavirus and hopefully it will be seen as a very positive intervention which shored up consumer confidence and kept the country on track.
This is clearly a serious moment for our sector and our businesses, but with the right planning and support it’s my belief that this will be a temporary discontinuity and our medium-term prospects remain incredibly positive given UK supply and demand in such a mature and effective mortgage market.