Chancellor Rachel Reeves has delivered the first Labour budget in 14 years, ending weeks of speculation over tax increases and changes to the government’s debt rules.
In what has been billed as the most consequential Budget in two decades, we finally know what those long-awaited difficult decisions entail.
Major announcements include a rise in National Insurance (NI) contributions for employers, and a decision not to extend the freeze on income tax and NI thresholds beyond 2028.
But what are among the key announcements for lenders? Here are some top takeaways.
Mortgage guarantee scheme could be made permanent
The government announced in the Budget that it will be engaging with industry experts over the autumn on the mortgage guarantee scheme, which it plans to make permanently available to support lending at 95%.
Under the scheme, the government acts as a guarantor for part of a home loan, as a way of encouraging lenders to offer low-deposit deals.
In the small print accompanying the Budget, the government said making the scheme permanent would give lenders confidence throughout the cycle, while making it easier for first-time buyers to realise the dream of home ownership.
The mortgage guarantee scheme was introduced by the Conservatives in 2021.
No tax raid on banks
Lenders had been bracing themselves for a potential levy, or ‘windfall tax’ on their profits.
But the Chancellor made no mention of any tax increase on banks in the Budget.
The banking industry had lobbied against such a tax rise, which could have threatened short term profitability and impacted on competitiveness.
Banks can breathe a sigh of relief.
Stamp duty changes could impact property lending
While the Chancellor left capital gains tax (CGT) rates on residential property unchanged, she did reveal some pain for second-home buyers and landlords after she announced a Stamp Duty hike from 3% to 5%.
This could dampen lending in the buy-to-let and second-home sectors, as increased costs make these investments less financially attractive. It could deter some investors from investing further in property, in doing so, reducing demand for mortgages.
Concluding thoughts
Following one of the most highly anticipated Budgets of recent years, the outlook for lenders is now clearer.
As these changes unfold, lenders will need to stay alert to the shifting financial needs of both business and individual clients alike.
This Budget signals an evolving lending landscape, one that will require adaptability and a close watch on new opportunities and risks ahead – Lenvi are here to support you every step of the way.
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