Housing looks set to be one of the key battlegrounds where the next election will be fought.
A growing population, lacklustre homebuilding and a squeeze on mortgage finance have “broken” the UK’s housing system, housing secretary Michael Gove said last month.
He worried that this could lead to young people feeling “shut out” from both “the financial markets and democracy”, and is understood to have the backing of Prime Minister Rishi Sunak.
But last year the UK added 234,400 dwellings, unchanged compared to the previous 12 months, according to Department for Levelling Up, Housing and Communities data in November.
This is below the 2019 Conservative manifesto target of adding 300,000 homes a year by the mid-2020s.
By contrast, Labour leader Keir Starmer has promised to build 1.5 million homes over five years if the party is returned to government, through a combination of looser planning rules and green belt construction.
Set against this backdrop, Chancellor Jeremy Hunt is under pressure to deliver a set of measures that begin to unlock the housing market ahead of the country going to the polls, widely expected to be in November.
These are the housing options in front of him ahead of next Wednesday’s Budget.
Lifetime ISA
The property limit for the Lifetime ISA has remained at £450,000 since its launch in April 2017. But if the limits of this tax-free savings account had risen in line with property prices it would currently sit at more than £560,000.
During the pandemic the government cut the withdrawal charge on Lifetime ISAs to 20% from 25%, to allow people to access their savings if their finances were squeezed. But this was later restored to 25%.
AJ Bell director of personal finance Laura Suter says: “It feels impossible that the government doesn’t view the current cost-of-living crisis in the same way.
“Reducing the exit fee would be a low-cost move for the government that would help first-time buyers who saved into their Lifetime ISA in good faith but, due to soaring inflation, now need to dip into their savings.”
99% mortgages
The Treasury was understood to be considering plans for a 99% mortgage scheme, that would act as a successor to the government’s decade-long Help to Buy scheme which ended last year.
The new scheme would see home buyers able to put down a 1% deposit on a new first home, with the government backing the overall loan.
Backers say the scheme has the potential to see almost 388,000 homes sold under the scheme, as Help To Buy did.
But critics argue the policy risks pushing up house prices, leaving homebuyers in negative equity and disproportionately benefitting housebuilders.
MPowered Mortgages head of product Peter Stimson says: “The Chancellor’s move to introduce 99% loan-to-value mortgages is an irresponsible attempt to grab headlines rather than create solutions and is indicative of a government that has run out of ideas.
“A 99% mortgage is, in essence, a 100% mortgage – the 1% deposit hardly contributes to preventing losses, and this will be reflected in the rates, which in all probability sit well above 6%.”
This scheme has garnered many headlines in recent weeks, but the latest reports say the Chancellor has scrapped this plan after banks warned that the move risked a surge in defaults among borrowers.
Stamp duty
The temporary £425,000 first-time buyer stamp duty threshold should be made permanent, say a range of groups as a way to boost activity among these borrowers, who make up around a third of all homebuyers.
It was raised from £300,000 as part of the disastrous mini-Budget in September 2022, but two months later Hunt said the level would return to its old level in March 2025, as part of his bid to stabilise the UK economy at the time.
But the Institute for Fiscal Studies calls stamp duty cuts on the purchase of property and shares, more “growth-friendly” than income tax or national insurance reductions.
Rightmove says ‘regional’ stamp duty bands should be introduced, pointing out that just 16% of homes for sale in London are priced below the current £425,000 threshold, compared to 91% of homes in the North East.
Private Finance technical director Chris Skyes points out that stamp duty tax breaks for homes “at the top end of the ladder” would free up larger homes
Skyes says: “Large stamp duty bills often disincentivise older property owners from downsizing the family home, which no longer contains the family.”
Inheritance tax
Inheritance tax receipts came in 7.5% higher at £5.7bn between April and December compared to the same period a year ago, according to the latest HMRC data, and is on course for its third record-breaking year in a row — forecast to come in at around £7.6bn.
The rate at which this 40% levy begins has been frozen at £325,000 since April 2009, but critics point out that more homeowners have been drawn into the threshold as property prices have risen. The government has long been lobbied to lift this threshold, or abolish the tax altogether.
AJ Bell director of personal finance Laura Suter says: “Cutting inheritance tax would clearly be a major headline-grabber.
“Despite the fact few estates are actually liable to inheritance tax, with less than 4% paying any death duties whatsoever, it is still a deeply unpopular tax.”
Deutsche Bank estimates Hunt will have the headroom to spend £18.5bn on a range of areas that may cover income tax, national insurance, ISA investment in UK-listed firms, child benefit, further fuel duty freeze, VAT thresholds – as well as housing reform.
