By It is fair to say that Jeremy Hunt’s first budget did not send many pulses racing in the property industry.
Even Kwasi Kwarteng’s notorious effort last September included a cut in stamp duty.
The current chancellor did not create any turbulence, though he was operating against the backdrop of renewed concerns about the banking sector, following the collapse of America’s Silicon Valley Bank.
His “no risk” budget left many wanting more, however.
The National Residential Landlords Association described it as missed opportunity to tackle the supply crisis in the private rented sector, while others were concerned about the lack of measures to lift battered spirits among homebuyers, following the autumn mortgage rout.
The Royal Institution of Chartered Surveyors (RICS) said it was disappointed by the lack of housing ambition in the budget.
The absence of significant property measures did not mean, however, there was nothing in the budget for people to get their teeth into.
The construction industry will be pleased to see that some of its pleas about worker shortages have been heeded, with five construction occupations added to the shortage occupation list on the recommendations of the migration advisory committee.
There was also plenty of content in the new assessment of the economy by the Office for Budget Responsibility (OBR).
It has become less gloomy about the short-term outlook for the economy and unemployment but is gloomier about the housing market.
In its new economic and fiscal outlook, it predicts that house prices will fall by 10% from their peak in the final three months of last year.
This, perhaps surprisingly, is slightly more downbeat than it predicted in that autumn, when the mortgage market fallout from that September 23 mini budget was still in full swing.
It noted that what it described as leading indicators from the Halifax and Nationwide have already fallen by between 3% and 6% from last year’s peaks.
There will be an even bigger fall in housing transactions, the OBR thinks, which it sees falling by 20 per cent from their peak towards the end of last year.
“Low consumer confidence, the squeeze on real incomes, and the expectation of mortgage rate rises to come are expected to contribute to continued falls in house prices and a reduction in housing market activity,” it says.
Will it be right? The latest figures for transactions, for January, show that they were down by 11% compared with a year earlier, and 3% lower than in December.
The official house price index shows that the annual growth rate has dipped below 10% but that there is little sign that the market is capitulating yet.
If anything, surveys suggest more optimism is creeping back in now that autumn’s turbulence is starting to fade in the memory.
On this, the new official forecast was also interesting on the outlook for mortgage rates.
You will know that in an era of predominantly fixed rate mortgages, the pass-through from a rise in the cost of borrowing is slower than in the past.
Some homeowners will already have had to refix at higher rates and roughly 300,000 a quarter will do so this year.
The OBR looked at when this would feed through to higher mortgage rates for everybody, in other words when the stock of outstanding mortgages fully reflects higher rates.
As it notes: “With more than 80% of mortgages on fixed-term contracts and the prevalence of fixed-rate mortgage contracts with terms of more than two years having risen in recent years, the increase in rates on new mortgages over recent months will take several years to feed through to the average mortgage rate.”
Its view is that this will be achieved in four years’ time, in 2027, by which time the average mortgage rate across all loans will be 4.2%, double the level in late 2021, the low point.
That is quite a hit, even if it occurs relatively slowly, but it could have been worse.
In November, the OBR thought that the stock of outstanding mortgages would be on a 5% average rate, 0.8 percentage points higher than it currently expects.
These things can change, for good and bad, in a remarkably short time.
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