Why the Spring Budget could be crucial for prospective homeowners

From energy firms and Treasury bean counters to childcare staff and first-time buyers, there are a myriad of reasons to be glued to the pre-Spring Budget rumour mill.

But for anyone looking to invest in bricks and mortar, the contents of Jeremy Hunt’s Spring Budget red box will likely be a source of more than a little fascination.

Speculation has been mounting that the Chancellor could be set to announce a series of buyer-friendly policies on 6 March, from 99 per cent mortgages to cutting stamp duty.

Coupled with the fact the housing market recorded a record sales slump in January, falling to its lowest level since 2013, this could be welcome news.

Nick Leeming, chairman of Jackson-Stops, told City A.M.: “The possibility of 99 per cent mortgages for first-time buyers, downsizing incentives and promises to ‘turbocharge’ housebuilding have become more prominent.”

But he noted “everything is still to play for until the Chancellor approaches the lectern on Wednesday”.

Over a decade of wage stagnation coupled with above average inflation has meant prospective first time buyers are more financially squeezed than ever.

A recent report published by Nationwide said a 20 per cent deposit on a typical first-time buyer home equates to c.105 per cent of average annual gross income.

This is down from the all-time high of 116 per cent recorded in 2022, but still close to the pre-financial crisis level of 108 per cent.

Nationwide said in 2022/23, nearly half of first-time buyers had help raising a deposit, either via a gift or loan from family or friends, or inheritance – up from 27 per cent in the mid-1990s.

House prices are projected to fall by two per cent this year, but still remain around £40,000 more expensive than they were before the pandemic.

But what – realistically – could the government actually do in the Spring Budget to help?

Speaking to City A.M., Tom Bill, head of residential research at Knight Frank, said: “Generally the economy or the interest rate environment has got worse, mortgages are starting to creep back up. I think government means are slightly tighter in what they can give away.”

“It might be a slightly defensive budget this time around and perhaps when we do get into an election later in the year they can offer more eye-catching [measures].”

Politically, helping young families and City high fliers get onto the property ladder, would be seen as a key vote winner in some quarters of the party.

James Cowling, co-founder of the Next Generation Tories (NGT), a pressure group aiming to address the Tories generational divide, thinks so.

“At the last election [2019] the average age where someone was more likely to vote Conservative was 45 – now with current polling it’s 68,” he said.

“What the party needs to do is have a very laser-like focus on how we win back working-age people from their late-20s to their mid-40s.”

And the aspirational, security-driven nature of housing is a key plank in building this bridge.

Policies the NGT are calling for include encouraging the government to work with mortgage lenders to give people longer term mortgages, similar to how in the US rates are fixed for 20 or 25-year terms, and for rent payments to be taken into account in affordability checks.

“It means you don’t have people massively exposed,” Cowling added. “When there is a big spike, a large proportion of the population in any given year will be coming off a fixed-term mortgage. It would give a lot of certainty.”

But supply-side policies still remain crucial to addressing Britain’s housing crisis, he acknowledged.

“We’d definitely call for a cut to stamp duty – our concern is it gums up the market – but the number one problem is a lack of supply.. and it’s the number one thing we need to address.

“[Supply-side reform is] still worth doing – but it’s not a replacement for the bigger problem.”

With an election brewing in the coming months, whether homebuying policies attract the hoped-for voters will be a crucial question, for both MPs and hopeful first-time buyers.