This week’s Budget had little direct impact on the housing market. Stamp duty is unchanged and there are no big changes for landlords, other than a lower level of tax free gains before paying capital gains tax.

The Chancellor has focused the Budget on stimulating the economy and jobs, encouraging as many people as possible to keep working and help fill the UK’s 1m job vacancies.

Focusing on economic growth and jobs ultimately supports the housing market as the health of the housing market is directly linked to the health of the economy.

Housing sales and prices tend to stagnate and fall when the economy is doing badly and unemployment is rising, while the opposite is true when the labour market is strong and post-tax household incomes are rising.

The tax burden has been rising for those on mid to higher incomes, meaning there has been no growth in post tax disposable incomes over the last 2 years.

Household budgets are also being squeezed by higher living costs and many will welcome the Budget announcement of a 3 month extension to the support for home energy bills.

Higher mortgage rates have added further pressure for new home buyers and those remortgaging. It’s welcome news that a very high proportion of those with mortgages are on 5-year fixed rate deals but as they come off these deals the increased monthly payments will hit monthly budgets.

Lenders and brokers are working with those who face material increases in mortgage payments to come up with tailored solutions to ease the pressure.

Mortgage rates have fallen back to 4.5% for new home buyers. This is well down on the 6% high’s seen at the end of last year but remains more than double mortgage rates a year ago.

The housing market can withstand higher mortgage rates and we have consistently argued that sub-5% mortgage rates would not lead to big price falls and this is bearing out.

However, new buyers have 20% less buying power than a year ago. This doesn’t mean prices will fall by this much, but people will look to buy smaller homes or move to areas that offer better value for money. Others may look to inject more equity into home purchases where funds are available.

Overall, the best way to offset higher borrowing costs - and housing costs in general including rents - is to help boost household incomes, which no-one would argue against.

As a result of weaker buying power, we have seen a gentle shift in demand towards flats as the early home buyers of 2023 sought better value for money.

We expect mortgage rates to stay in the 4-5% range over 2023, so those who would like to move should not expect rates to move much lower and plan accordingly.

The big challenge in the housing market is affordability, especially for those who rent or have small deposits to put towards a home. Rents are rising fast, up 11%, which is well ahead of earnings growth, which is currently  6.7%.

Many younger households looking to buy and renters of all ages are concerned about the lack of supply and scale of recent rent increases. This is all a result of low rental supply and a lack of growth in the size of the private rented sector over the last  6 years.

As well as focusing on jobs and growth, it’s important that the government continues to focus on growing housing supply through the development of new homes of all tenures. Only by improving supply can we ease the affordability pressures felt across the market.

“The UK will not enter a technical recession this year,” said Chancellor Jeremy Hunt in his Spring Budget statement.

The UK economy is set to contract by 0.2% in 2023, before heading into a growth rate of 1.8% in 2024.

The unemployment rate is also expected to be less severe this year, with unemployment rising by less than 1% to 4.4%.

And in welcome news, inflation has peaked, with the Office for Budget Responsibility reporting that it will fall back to 2.9% by the end of 2023.

So how does the Spring Budget affect household budgets?

Acknowledging that the UK has one of the most expensive childcare systems in the world, Hunt pledged free childcare for all under 5s.

‘Nearly half of non-working mothers say they’d prefer to work if there was suitable childcare', said Hunt.

'But for many a career break becomes a career end.’

In eligible households where all adults are working at least 16 hours a week, 30 hours of free childcare will be provided for children aged 9 months or over, starting when maternity or paternity leave ends.

The plan is set to be introduced in stages:

• From April 2024, working parents of 2-year-olds will receive 15 hours of free childcare

• From September 2024, this will be expanded to all children aged 9 months or over

• From September 2025, every parent will have access to 30 hours of free childcare a week

How will it happen?

• Childminders are to be offered incentive payments of £600 for signing up to the profession, rising to £1,200 for those who sign up through an agency

• Nurseries will also be given more flexibility in how they operate, with minimum child to staff ratios raised from 1 to 4 to 1 to 5 - as is currently the case in Scotland

• Parents on Universal Credit who want to move into work or increase their hours will have their childcare costs paid upfront by the government, with £951 allocated for one child and £1,630 allocated for two

By September 2026, the government plans for all schools to offer wraparound care from 8am to 6pm.

The energy price guarantee will remain at £2.5K for the next 3 months, ahead of an expected fall in energy prices in July, saving the average family £160.

And for the 4m households on pre-payment meters, charges will be brought inline with comparable direct debit charges.

“The energy premium paid by our poorest households is coming to an end.,” said Hunt.

Hunt also said the UK needs to focus on ‘domestic sources of energy that fall outside Putin or any autocrat’s control.'

He added: ‘Electricity generated by renewables has increased from 10% to 40% but we need another critical source of cheap and reliable energy - and that is nuclear.

‘It’s vital to meet our Net Zero obligations.’

So nuclear energy will now be classed as environmentally sustainable, giving it access to the same investment incentives as renewable energy.

The planned 11p rise in fuel duty will be postponed as ‘now is not the right time to up-rate fuel duty inline with inflation’.

So for a further 12 months the government will maintain the 5p cut and freeze fuel duty.

There are currently 1m vacancies in the economy and 7m adults of working age who are not in work.

Hunt said the government wants to remove the barriers that stop people who want to from working.

In a reform of disability benefits, Hunt said the government plans to abolish the work capability assessment, so that claimants can keep their benefits and still work.

He also announced plans for those aged over 50, ‘experienced workers’, to encourage the 3.5m people who are of pre retirement age but who are not currently part of the labour force back to work.

The pensions annual tax-free allowance is set to be increased by 50% from £40K to £60K, while the lifetime allowance will be abolished.

The government believes this reform will stop over 80% of NHS doctors from receiving a tax charge.

Hailing Canary Wharf and Liverpool Docks as ‘2 outstanding regeneration projects that transformed the lives of thousands of people’, Hunt announced a further 12 new investment zones for:

• West Midlands

• Greater Manchester

• Liverpool City

• North East

• South Yorkshire

• Tees Valley

• West Yorkshire,

With 4 planned for

• Scotland

• Wales

• Northern Ireland

A further 8.8bn us set to be invested in sustainable transport, while the government increased the ‘pothole pot’ by £200m to £700m, with £320m allocated to Scotland, £180m for Wales and £130m for Northern Ireland.

For ‘the great British pub’ Hunt increased draught relief, meaning the duty on alcohol will be up to 11 pence lower than that sold in supermarkets.

‘British ale is warm but the duty on a pint is frozen,’ he said.

The number of buy-to-let mortgages available has reached its highest level since before the mini-Budget as the market continues to recover.

A total of 2,400 different deals are available to people buying a property to rent out, a level last seen in July 2022, according to financial information group Moneyfacts.co.uk.

The average interest rate charged on fixed rate buy-to-let mortgages has also continued to fall.

The typical cost of a two-year fixed rate deal is now 5.81%, while interest on a five-year one has dropped to 5.72%.

Rachel Springall, finance expert at Moneyfacts.co.uk, said: “It is encouraging to see buy-to-let product choice gradually recover from the shock surrounding the fiscal announcement.”

The choice of buy-to-let mortgages for landlords fell sharply in the wake of the mini-Budget as lenders pulled their deals to reprice them.

This was because former Chancellor Kwasi Kwarteng’s announcement led to a steep increase in government borrowing costs, which in turn impacted the rates lenders pay to borrow money for fixed rate mortgages.

The average cost of the deals that were available also shot up to more than 6%.

But Chancellor Jeremy Hunt reversed most of the mini-Budget measures, helping to restore confidence and reduce government borrowing rates.

As a result, lenders have gradually relaunched their mortgage ranges and reduced the interest rates they charge, despite the Bank of England’s Bank Rate actually increasing during the same period.

Unfortunately, despite the fall in interest rates, if you are coming off a two-year or five-year fixed rate deal you are still likely to face a significant increase in your monthly repayments.

For someone borrowing 60% of their property’s value, the average two-year fixed rate mortgage was 2.14% in March 2021, compared with 5.39% now, the equivalent of £542 a month more on a £200,000 interest-only mortgage.

The difference is slightly less for five-year deals, with these rising from an average of 2.74% in March 2018 to 5.22% now, which would increase monthly payments by £413 on a £200,000 interest-only loan.

But these are only average rates, and there are better deals available if you shop around.

Springall said: “The drop in average buy-to-let rates appear more subdued than seen within the residential mortgage sector, but lenders have made moves to entice new business.”

Higher interest rates not only make a mortgage more expensive to service, they also make it more challenging to pass lenders’ affordability tests.

Lenders use a different affordability test for buy-to-let mortgages compared with mortgages for your main home, known as the Interest Cover Ratio.

Under this test, the rent you receive from the property must be the equivalent of between 125% and 145% of your monthly mortgage interest payment.

If your rent isn’t high enough to meet this affordability test, some lenders will allow you to do something called ‘top slicing’, under which they include some of your income in their affordability calculations.

That said, average rents have also risen at their highest rate for a decade, according to our latest Zoopla Rental Index.

The typical cost of renting a home increased by 11.5% in 2022 to stand at £1,118, with London seeing a 16.1% increase, while in Scotland rents rose by 12.5%.

As we transition to a buyers’ market, we asked Foxtons Chief Executive Officer Guy Gittins to share his advice for sellers in 2023.

It’s always a good time to sell a property, whether the market’s going up or down. It just depends on what your onward move is.

If you’re moving up to a larger property and the market’s come off by 5%, then it really is a great time to be able to make that move.

But for the couple living in that large family home, who might want to downsize to a smaller property, that becomes a little bit less attractive.

It is so much more important, if you can afford the move, to be in a property that's right for you and your family.

I’ve seen way too many people holding off a move because they’re trying to play the market and ultimately what happens is that they stay in a property that’s no longer suitable for them for too long.

The joy and benefit of being in the right property for you and your family, in my opinion, far outstrips any financial gain on a 5% trade if you’re trying to play the market.

Very often people will miss that moment anyway because nobody can call the top or bottom of the market, it’s very difficult.

And when you’ve stayed in a property for over 10 years, these small movements in prices year-to-year become totally irrelevant.

1. It’s all about correct pricing. Take your agent’s best guidance on pricing, because they absolutely know the market and they’ve got the data on it.

2. Presentation is absolutely critical.

3. And plan your onward purchase. Because if you’re selling in order to buy, it’s very advisable to be doing both searches at the same time.

Once you go under offer, you don’t want to be holding that process up, particularly if you’re looking for a forever home.

And the last thing you want to be doing is trying to find that in a four week window, it just doesn’t work like that.

Not at all, we’re seeing overseas buyers, first-time buyers, needs-based buyers, the spread of buyers has pretty much stayed the same as last year.

As soon as we had the mini budget at the start of Q4 last year, buyer numbers dropped dramatically very quickly. In some instances by 50%, compared to what we were seeing before the mini budget.

But what’s been very interesting is that for the first couple of months of this year, those numbers have recovered considerably and we’re really seeing a large number of new buyers coming back into the market.

There’s a realisation that interest rates are not going to be 6% - 7%.

The swap rates between the banks - and therefore the actual interest rates that somebody would be paying - have come down considerably from the last couple of months of last year and that’s absolutely encouraging people.

Bearing in mind how banks have had to be structured following the financial crisis, most mortgages over the last five years have been stress tested at 3% to 4%.

So when people are coming up to their next mortgage or their next move, that has already been factored into the market.

And while it might not be as comfortable and people might not have as much free cash, we’re not seeing forced sellers coming to the market, desperate to exit their property because they can’t afford their mortgage rates. That’s absolutely not happening.

And that’s because of the very sensible policies that were put in place following the global financial crisis.

We’re not seeing a crash in any way, shape or form.

What we are seeing is some of that really toppy part of the market, the froth from the first three-quarters of last year (which saw 5% gains from 2021), is now coming off of the market.

But we’re seeing a lot of activity, buyers are coming into the market this year, viewing numbers are high and we have a solid outlook for the rest of this year.

We are seeing a higher volume of price adjustments in the marketplace.

But when a property’s been on the market for a while and it has that price adjustment, it’s stimulating a lot of interest.

It’s about being correctly priced against where the market is trading. That’s the key.

At Foxtons, because we’ve got access to so much data, we’re able to price very accurately, stimulate activity and get you the best price for your property.

That is the value that agents bring, having access to that vast amount of data, so that we advise clients accordingly.

With anything in life, it’s all about first impressions and they really do matter. So the presentation of your property as it appears to the outside world is really, really important.

The photos that the agent takes are absolutely essential to be able to capture everything that’s special about your property.

That’s the first hook as your window to the world to engage and create some interest.

And when the viewings actually start, it’s really important that the home is presented in the very best possible way.

It might sound old school, but decluttering is essential. Buyers want to see the property and all of the space.

If it’s looking a little bit tired, it’s surprising what a lick of paint can do to an entrance hall, a living area or a master bedroom, it really can lighten the entire experience.

Always have the curtains open if you can, you want to flood the property with as much light as possible.

And make sure anything that makes the property look like it’s in poor condition has been rectified before viewings start because that might turn some buyers off.

If they see a big patch of damp in the corner, they may be put off by that. But if it can be dealt with ahead of marketing, then that’s something that incoming buyers don’t have to worry about.

For sure. And we would recommend to anybody selling a property to ensure they have some carefully chosen furniture to present the space well, so people can see the lifestyle that they may be able to have.

1. Educate yourself about your chosen area. No matter what the market is doing, you’ve got to know where things are trading at and the type of property you can genuinely afford.

The more defined your search, the more educated you’ll be about that market. And when you see the right thing, you’ll be able to press the button on it.

2. Work with your agent and not against them. The best agents are able to hold your hand as your search evolves. And everybody’s search evolves.

A very small percentage of buyers actually buy in the area that they first started looking in, at the price they first started looking for, with the property attributes they initially wanted.

As their search evolves, their attributes start to change and the best agents really can help you with that process.

3. Don’t expect an offer of 20% below asking price to be accepted, that’s not where the market is at. You’ve got to be realistic about going out there.

If you’re making offers that are consistently not being accepted, you have to track and understand where the market is.

It might be that your expectations are far below the reality.

We’ve seen an uplift in buyer numbers coming back into the market, far above what we saw at the end of last year.

This is starting to pick up pace.

The Competition and Markets Authority (CMA) has launched an investigation into the cost and availability of housing in England, Scotland and Wales.

The market study will look into whether housebuilders are failing to deliver the homes people need at sufficient scale and speed.

The CMA will also start a consumer protection project looking at the experience of those living in rented accommodation and whether more could be done to help landlords and intermediaries understand their obligations.

Sarah Cardell, chief executive of the CMA, said: “The quality and cost of housing is one of the biggest issues facing the country.

“If there are competition issues holding back housebuilding in Britain then we need to find them. But we also need to be realistic that more competition alone won’t unlock a housebuilding boom.”

The CMA’s market study into housebuilding will focus on four key areas.

The first area is housing quality, such as whether builders are delivering the sort of homes that buyers and communities need, as well as looking at the fairness of estate management fees charged for unadopted roads and other amenities.

It will also look at land management and whether developers’ practice of ‘banking’ land, either before or after receiving planning permission, is anti-competitive.

Other areas include the extent to which local authorities oversee the delivery of homes, and the requirements for builders to include affordable homes.

Finally, it will consider innovation and whether there are circumstances holding back housebuilders from adopting new building techniques or moving towards more sustainable, net zero homes.

The consumer enforcement work in the rented sector will focus on the end-to-end experience from a tenant’s perspective, including finding somewhere to live, renting a property, and moving between homes.

It will also identify any consumer protection issues that may arise, looking at the relationship between tenants and landlords, as well as the role of intermediaries, such as letting agents.

The CMA is able to use compulsory information-gathering powers to examine the housing market to see why it may not be working well for consumers.

The process will enable it to develop a deeper understanding of how housebuilders decide to deliver new homes and their interaction with local authority housing targets.

The study will also consider the issues faced by smaller, regional house-building firms.

Market studies can lead to a range of outcomes, including making recommendations to the government to change regulations or public policy, encouraging businesses to self-regulate, taking consumer or competition law enforcement action against firms, or conducting a more in-depth study.

The CMA must publish its report into the market setting out its findings and any action it plans to take within 12 months.

For the rented sector, the CMA will report on its initial findings and proposed next steps this summer.

The average cost of heating and lighting a home could fall later in the year following a near £1,000 reduction in the energy price cap.

Energy regulator Ofgem has cut the price cap for gas and electricity customers on their providers’ default and variable tariffs from £4,279 to an average of £3,280 a year from 1 April.

But the move, which follows recent falls in wholesale energy prices, will not have an immediate impact on customers’ bills due to the government’s Energy Price Guarantee (EPG).

Under the guarantee, the government stepped in to limit the average household’s combined energy bill to £2,500 until the end of March, rising to £3,000 from 1 April.

As a result, customers will still see an increase in their energy bills of around £500 a year from April.

But the reduction to the energy price cap means the average consumer can expect to have lower energy bills in the months ahead, once the energy price cap falls below the level of the EPG.

Ofgem said its cut to the energy price cap, which limits the amount suppliers can charge per unit of energy, was due to a significant reduction in the cost that companies faced in buying and providing energy to customers.

Energy prices have soared following the start of the conflict in Ukraine in February 2022.

The military action led to the UK, EU and US putting restrictions on oil and gas imports from Russia, which had previously accounted for 43% of the EU’s natural gas imports.

The fall in supply coincided with a rise in demand for energy as economic activity resumed following Covid-19 lockdowns, combined with a cold winter in Europe and a hot summer in Asia, where electricity is used to power air conditioning units.

The resulting mismatch between supply and demand pushed gas and electricity prices higher.

Unfortunately, the reduction in the energy price cap will not lead to an immediate reduction in gas and electricity bills for consumers.

This is partly because suppliers purchase their energy months in advance, and partly because of the increase to the level of the EPG.

Ofgem CEO Jonathan Brearley said: “Although wholesale prices have fallen, the price cap has not yet fallen below the planned level of the Energy Price Guarantee.

“This means, that on current policy, bills will rise again in April. I know that for many households this news will be deeply concerning.”

But he added that the reduction in the energy price cap reflected a fundamental shift in the cost of wholesale energy for the first time since the gas crisis began, suggesting the pressure seen in the energy market was starting to ease.

“If the reduction in wholesale prices we’re currently seeing continues, the signs are positive that the price cap will fall again in the summer, potentially bringing bills significantly lower.”

If you’re worried about being able to afford your energy bills, or you’re already struggling, make sure you claim any support that’s available to you.

Cost-of-living: help with energy bills

Check that you have claimed any cost-of-living or cold weather payments you are entitled to from the government, as well as the warm home discount from suppliers.

A number of the major energy companies offer grants to help people struggling with their fuel bills. For example, British Gas offers up to £1,500 for individuals and families who are in energy debt, regardless of who their supplier is.

If you’re already facing difficulties, contact your supplier as soon as possible.

Ofgem has rules that they must help you if you’re falling behind. They should work with you to create an affordable payment plan.

You can also take steps to reduce your gas and electricity consumption. Try turning your thermostat down, taking shorter showers, draft-proofing your windows and doors, not using a tumble drier and turning off appliances left on standby mode.

People living in new-build houses can expect to pay an average of £3,117.85 a year less for gas and electricity once the government’s Energy Price Guarantee ends on 1 April, compared with those living in older less energy efficient homes.

Even while the Energy Price Guarantee remains in place, those living in new build houses are saving around £2,520.73 in annual bills, while those in flats are saving around £1,140.74, according to research by the Home Builders Federation.

The group, which analysed government Energy Performance Certificate (EPC) data, found that 85% of new build houses and flats have an EPC rating of A or B, the top two ratings available, compared with just 4% of existing dwellings.

The study also found that 53% of homebuyers are now factoring in running costs when purchasing a property.

Neil Jefferson, managing director of the HBF, said: “Energy efficient new homes are saving owners thousands of pounds a year in running costs.

“In the face of mounting pressures on households across the country, the energy performance of a home is an increasing motivator for consumers considering a new home purchase.”

The report reflects our own findings that buyers are becoming more value-conscious due to higher mortgage rates, inflation and the cost-of-living squeeze.

The conflict in Ukraine has triggered soaring gas and electricity bills, making people increasingly conscious of the cost of heating their home.

The government’s Energy Price Guarantee has kept bills lower than they would have been, but the guarantee is currently due to end in April.

Meanwhile, housing developers are increasingly incorporating energy efficient designs and materials into their properties, making them cheaper to run than retrofitted older homes.

As a result, the average new build home used just 95 kWh of energy per square metre of area in 2022, compared with an average of 252 95 kWh per square metre for older homes.

The HBF is calling on lenders to introduce green mortgages that take into account the energy efficient properties of new homes.

It points out that most mortgage calculations are based on the national average energy bill.

The group argues that with 18% of potential buyers saying the main issue preventing them from purchasing a property is uncertainty over whether or not they will be able to secure a mortgage, factoring in the lower energy bills for new homes would help more people get on to the property ladder.

Recent research by the Royal Institution of Chartered Surveyors found that not only are energy efficient homes cheaper to run, but they are also outperforming other properties in the current housing market.

Six out of 10 estate agents said homes with high energy efficiency ratings were holding their value despite the overall market slowdown.

At the same time, 40% of estate agents said they were seeing more interest from potential buyers in energy efficient homes.

Meanwhile, four out of 10 sellers attached a price premium to their home if it had a high energy efficiency rating.