In his first Budget, John Healey’s mission was clear: don’t spook the bond markets. On that score it was a success, with markets barely moving once he left the dispatch box. That’s a hopeful sign for mortgage rates, with average five-year fixes having topped 6 per cent in recent weeks. But despite some small feelgood giveaways and a few bullets dodged, there was a sense that little had changed, and the outlook for households and the housing market looks much as it did pre-Budget Day.
Economic outlook
The IMF has flattered the UK of late, lifting its 2026 growth forecast to 1.3 per cent in October from 1.0 per cent in July. The OBR is a little more sober. It expects 1.2 per cent this year, stronger than its March forecast, dropping to 1.0 per cent in 2027. The IMF has also trimmed its 2027 forecast from 1.3 to 1.2 per cent, citing higher energy prices and rising long-term interest rates, so both bodies see the same headwinds.
For housing, the OBR expects prices to rise 2 per cent this year and a further 2.5 per cent in 2027, both below inflation. Transactions are forecast to edge up from around 1.2 million this year to 1.3 million in 2031. The UK has outperformed expectations in 2026, but the energy shock and higher rates squeezing households look set to continue to limit housing demand next year. The outlook for housing delivery remains particularly gloomy, despite the Your First Home announcements, with forecasts we’ll see 193,000 fewer net additions over the next five years than they were expecting back in March.
Source: OBR
More money for affordable housing
The government has promised the largest council housebuilding programme since the post-war era. An additional £1.5 billion has been allocated, with the expectation that it will fund around 10,000 social and affordable homes, taking the Social and Affordable Homes Programme above £40 billion over 10 years. It’s a welcome start but a fraction of what is needed, and the detail has been deferred to the 10-Year Plan. But the pace at which councils can be financed, staffed and cleared to build matters as much as the headline numbers.
Another blow for smaller landlords
The further 2 percentage point rise in income tax on property income from April 2027, on top of the 2 points already planned, is another blow to small landlords. It takes rates from April 2027 to 24, 44 and 49 per cent for basic, higher and additional rate taxpayers. It only adds to a pattern of rising costs that has been weighing on buy-to-let landlords for some time and will undoubtedly lead some to question their future in the sector, at a time when demand for rented homes continues to rise.
Building regulations and policy
The government has committed to no major changes to building regulations for the remainder of this Parliament, a relief to an industry that has faced significant change in recent years. Building safety is the understandable exception, including recommendations from the Grenfell Inquiry. There is also a new exemption from Biodiversity Net Gain requirements for residential brownfield sites of up to 1.5 hectares.
First Time Buyer ISA
Lifetime ISA holders buying a home above the £450,000 cap can withdraw their funds with the charge cut from 25 per cent to 20 per cent. They lose the government bonus but get back what they paid in. The new First Time Buyer ISA, from April 2029, will keep the 25 per cent government bonus on up to £4,000 saved each year.
Source: HM Land Registry
Your First Home
First announced at the Labour Conference, the Budget gave us some much-needed detail on Your First Home. The scheme will provide £4.7 billion of equity loans to help around 70,000 households onto the housing ladder, supporting an estimated 20,000 new homes. Buyers get a 20 per cent equity loan with a minimum deposit of 2.5 per cent, interest-free for five years. The scheme opens for pre-registration by the end of December, with the first loans in April 2027.
Household income is capped at £110,000 outside London and £140,000 inside. Outside London, price caps will be linked to local authority median prices, while the London caps are £650,000 in inner London and £500,000 in outer London.
That could create some interesting quirks, particularly in higher value pockets of the home counties. If upper limits are set at median values, first-time buyers could have more spending power in Elmbridge than Knightsbridge, with median prices there £25,000 above the inner London cap at £675,000. Similarly, buyers in St Albans could buy homes costing £115,000 more than those in nearby outer London with its £500,000 cap.
The caps look more generous than expected in London, which matters in a market where Molior London recorded just 1,400 sales in Q3 and Help to Buy supported almost 44,000 purchases before it ended. The test is whether it can restart sales at prices developers need to make schemes viable.
Source: OBR
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