The Labour government’s first Budget made its debut with ambitious objectives, aiming to tackle the ‘financial black hole’ while addressing pressing issues in housing, employment, and business.
Yet, reactions across the mortgage and property sectors highlight concerns that some policies may impact affordability and growth, potentially outweighing the intended benefits. Here, we delve into responses from the industry and examine the potential implications of this Budget.
Housing market supply vs affordability
Labour’s pledge to build one-and-a-half million homes addresses a pressing need for increased supply. However, as John Phillips, CEO of Just Mortgages and Spicerhaart, observed, the Budget provides limited support for those looking to purchase homes now.
Phillips also warns that some policies may inadvertently place additional pressure on renters and first-time buyers.
“There was very little support for potential buyers and the affordability pressures they are facing. The worry is that some measures may only add to these pressures. Increasing employers’ National Insurance contributions is a key example, with its potential to stifle job creation and progression for working people,” Phillips noted.
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The affordability crisis could worsen, especially as the increased stamp duty on second homes reduces rental market supply, driving rent prices up and making it harder for renters to save for deposits.
Labour’s focus on boosting housing supply raises another question: who will be able to afford these homes?
Matt Harrison, commercial director of Finova Payment Mortgage Services, commented on this discrepancy, calling it “all supply, no support.” As average property prices continue to climb, mortgage brokers are becoming increasingly essential in helping buyers navigate financing options in this competitive and high-cost market.
“Brokers will play an essential role… helping borrowers explore every possible financing option to secure a home,” Harrison observed, underlining brokers’ importance in guiding clients through financing solutions to make the most of limited options.
Stamp duty impacts first-time buyers
Nick Hale, CEO of Movera, raised concerns over Labour’s decision not to extend the increased nil-rate threshold for first-time buyers’ relief.
He said: “With the average house price in England hovering around £310,000, many first-time buyers relied on this temporary relief to offset rising costs… Now, the impending April 2025 deadline creates a ‘cliff edge’ effect that could push prospective homeowners into a buying frenzy to avoid higher stamp duty land tax (SDLT) costs after the threshold reverts. This rush may inflate prices further in the short term, driving demand up temporarily, only to see a sharp dip post-deadline.”
This ‘cliff edge’ effect could lead to market instability, with a potential dip in demand following the deadline.
Later life sector: optimism amid challenges
Richard Pike, chief sales and marketing officer at Phoebus Software, offered an optimistic take on the evolving later life sector despite wider industry challenges.
“Now that the dust has settled, I think it’s fair to say that the impact of the Budget on the industry wasn’t quite as significant as expected – especially in areas such as inheritance tax (IHT), pensions, and capital gains tax (CGT).
“Trump winning has also made the markets more positive. Swap rates aren’t reflecting the long-term interest rate position, and lower rates moving forward should bolster the later life sector. We’ll see an upturn as equity release can still fund a better retirement lifestyle and reduce future IHT liability.
“The later life sector continues to recover, bolstered by recovering house prices lifting the value of UK property equity to a record-breaking £5.7trn in the first half of the year. Add to that the downward course of interest rates and pricing plus new product innovations, and it’s clear as a bell that property equity should form part of a conversation that a homeowner in their 30s, 40s or 50s is having around funding post-retirement lifestyle.
“Overall, I believe 2025 will be a great year for our market. And I expect later life to become one of the major success stories.”
Increased pressure on SMEs from National Insurance changes
While the government’s decision to raise National Insurance for employers is designed to address a £22bn deficit, it has sparked concerns among small and medium-sized enterprises (SMEs).
Martyn Smith, managing director at Black and White, noted that while this change may benefit public finances, it increases hiring costs without providing additional support for businesses through the employment allowance.
“For growing businesses… this poses a real challenge. The increased costs could hinder growth, force some companies to downsize, or even lead to closures,” Smith cautioned, highlighting the potential risks for SMEs if rising costs lead to redundancies rather than growth.
The increased National Insurance contribution may restrict SMEs’ ability to expand, resulting in fewer opportunities for wage increases and new hires.
Looking ahead
This was perhaps the most highly anticipated Budget in a decade, anticipation that now seems unanswered, with reactions from industry leaders varying from optimism to apprehension.
The coming months will reveal the true effects of this Budget on hiring, home buying, and the rental market. The mortgage and property sectors will be watching closely, as Labour’s policies shape the landscape for businesses and prospective homeowners alike.
A measured approach that supports growth without overlooking affordability will be essential to realising Labour’s high-growth vision for the economy.
