The average price of a property in the UK housing market has increased by 0.9% in October to a record £371,158 according to Rightmove. This follows the announcements made in the mini-budget which were intended to have the opposite effect and make it more achievable for first-time buyers to enter the property market. Rightmove said that it is likely that asking prices will fall in November and December ‘as they normally do’ but stated that it would be important to distinguish these seasonal price changes from market changes caused by other factors.

Banks and mortgage lenders have been raising interest rates in a reaction to the mini-budget announcement with the average rate of a new two-year fixed mortgage climbing to 6.47% – rising above 6% for the first time since 2008. Moneyfacts shows that the average two-year fixed mortgage has increased from an average of 4.74% on the day of the budget, with the rate even being as low as 2.34% at the start of December last year. Rising mortgage rates mean some homeowners’ monthly payments are increasing by a significant amount. This has caused home buyers who secured a mortgage offer at a lower rate to rush to complete their purchase before that lower rate offer expires, according to Rightmove.

The changes made in the mini-budget will see the stamp duty threshold – the price at which buyers have to begin paying the levy – double from £125,000 to £250,000. A measure will also be introduced meaning first-time buyers pay no stamp duty on the first £420,000 of their purchase, and the value of the property which first-time buyers can claim relief on has risen from £500,000 to £625,000. Overall, the steps taken mean that 200,000 people will be taken out of paying stamp duty altogether

Properties in the UK are now more unaffordable than ever, with figures released by the ONS showing that the average home sold in England cost the equivalent of 8.7 times the average annual disposable income – which is the worst affordability ratio in England since records began in 1999. House sellers have continued to raise their asking prices despite Brits facing higher interest rates and a cost of living crisis. For many Brits, getting onto the property ladder is now an unachievable dream, with an unprecedented level of demand causing a severe undersupply of housing which the industry has been suffering from for the past few years.

David Hannah, Group Chairman of Cornerstone Tax provides some expert insight:

“We all know the challenges facing Liz Truss regarding the UK’s property market – inflation and rising interest rates are causing a whole raft of issues. We’ve seen a surge in building costs and building materials which is slowing down construction. At the same time, the affordability of mortgages has worsened and monthly payments are soaring in a reaction to the mini-budget announcements and that’s going to impact first-time buyers, but also anybody on a variable rate mortgage. Finally, it will inevitably lead to a slowdown in construction which will exacerbate the undersupply of UK property. So, whilst prices might flatten towards the end of the year and the rate of growth may slow, I don’t expect property prices to fall.

“The cut in stamp duty hopes to provide first-time buyers with a better chance to get on the property ladder, however with the average price of a property ruching a record £371,158 buying a house continues to move further out of reach for first-time buyers. The cut raises the threshold of how much a property has to cost before paying stamp duty to £250,000, doubling from the previous £125,000. First time buyers previously paid no stamp duty on the first £300,000 – this will also be increased to £420,000, and the value of the property which first-time buyers can claim relief on will go from £500,000 to £625,000. Overall, the steps taken mean that 200,000 people will be taken out of paying stamp duty altogether.

“With figures released earlier this year from Zoopla showing more homes have been pushed into the higher stamp duty bracket, the need for the brackets to be increased in line with inflation is evident. Plans were also announced in the mini-budget to provide more available space for properties to be built – a move to combat the unbalanced supply and demand level in the UK property market.”