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UK recession explained: What mortgage interest rates rise means for my savings

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The Bank of England has increased its base rate 0.5 percentage points to 1.75 per cent, the biggest interest rate hike in 27 years and its sixth rise since December 2021.

Its Monetary Policy Committee announced the move today, with eight members out of nine voting in favour of the hike. 

The five previous base rate increases since December 2021 each raised it by a smaller 0.25 percentage points, taking it from 0.1 per cent to 1.25 per cent, before the move today.

Today’s 0.5 percentage point hike is the biggest jump since 1997 when responsibility for the base rate was handed from the Government to the Bank of England.

Rate rise: The Bank of England has increased the base rate of interest by 0.5% to reach 1.75%

Rate rise: The Bank of England has increased the base rate of interest by 0.5% to reach 1.75%

The aim is to get a grip on the soaring inflation which continues to drive up the price of everyday essentials such as food, fuel and energy bills.

But the move will increase the cost of new fixed-rate and existing variable rate mortgages. 

Experts have said that repayments on the typical mortgage have now increased by hundreds of pounds per year since the base rate rises began. 

Banks and building societies may choose to up their savings rates slightly due to the base rate increase, although since the base rate began rising in December 2021 most have failed to increase savings rates to a comparable level.

Why is the base rate going up?

The Bank of England has now increased the base rate six times since December 2021, going from 0.1 per cent to 1.75 per cent, in a bid to bring down inflation.

The base rate determines the interest rate the Bank of England pays to banks that hold money with it and influences the rates those banks charge people to borrow money or pay people to save.

By raising the base rate, it will hope to make borrowing more expensive and saving more lucrative for Britons.

This in theory should encourage people to spend less and save more and therefore help to push inflation down, by dampening the economy and the amount of money banks create in new loans.

Still rising: The Bank of England has said CPI inflation could reach 13% in the next few months

Still rising: The Bank of England has said CPI inflation could reach 13% in the next few months

At its simplest, inflation is the percentage increase in the cost of goods and services over the course of a year. 

The Bank of England said today Consumer Price Index (CPI) inflation was likely to hit 13 per cent in the next few months, blaming increases in the cost of energy.  

CPI is the measure against which the Government sets its inflation target, currently at 2 per cent.

Yesterday, think tank the National Institute of Economic and Social Research warned that the retail prices index, a separate measure of inflation, could hit 17.7 per cent by the end of the year.

RPI is no longer an official statistic but it is used to set rail fares, student loans repayments and some payments to the Government.

High inflation is a problem because it usually indicates that prices are rising at a faster level than people’s incomes. It also makes it difficult for businesses to set those prices and for households to plan their spending.

What does it mean for mortgages?

The typical cost of a mortgage has been pushed up by successive base rate rises. 

During the pandemic house buying boom in 2020 and 2021, interest rates reached record lows with some deals priced at below 1 per cent – but now the cheapest fixed deals are charging more than 3 per cent.

According to fresh analysis by the financial information service Moneyfacts, the average two-year fixed mortgage rate is now 3.95 per cent. In August 2020, it was just 2.08 per cent. 

Similarly, the typical five-year fix has now surpassed the 4 per cent mark to reach 4.08 per cent – up from 2.34 per cent in August 2020. 

With the base rate having risen, these averages are set to increase further.  

Cecilia Mourain, managing director for homebuying at the finance app Moneybox said: ‘Lenders will hike mortgage rates straight after a Bank of England rate rise, but we’ve seen that typically they will come down again, ever so slightly, in the following weeks as lenders continue to compete for business.’

However, how this rise affects borrowers depends on the type of mortgage they have.

On the rise: Average mortgage rates have been increasing since 2020

On the rise: Average mortgage rates have been increasing since 2020

For those not on fixed rates the Bank of England decision brings another increase, the third this year, and even those on fixed rates will face increased interest rates when their term ends.

Simon Gammon, managing partner of estate agent Knight Frank’s finance arm, said: ‘Mortgage rates are now changing on a daily basis and lenders are giving borrowers and brokers little notice about repricing.

‘Some homeowners who are nearing the end of their terms are facing a shock when they come to refinance, because they are unable to borrow as much as they hoped, [and some of] those who are looking to buy are realising once-obtainable properties are now out of reach.’

According to Moneyfacts, the typical standard variable rate mortgage is now at 5.17% interest

According to Moneyfacts, the typical standard variable rate mortgage is now at 5.17% interest

Variable rates

Mortgage holders with a discount deal, or a base rate tracker mortgage will see their payments increase immediately.

As rates have fluctuated over the past year fewer borrowers are choosing variable rates, opting instead for fixed mortgages as a security against the rises.

Those on their lender’s standard variable rate (SVR) will also likely see rates rises over the coming weeks. According to Moneyfacts, the typical SVR is now at a rate of 5.17 per cent. For someone with a £200,000 mortgage, a rise of 0.50 per cent would add approximately £1,400 onto total repayments over two years.

Rising repayments: These figures show how much monthly repayments could rise on a typical standard variable rate mortgage, if the rates were increased 0.5% in line with the base rate

Rising repayments: These figures show how much monthly repayments could rise on a typical standard variable rate mortgage, if the rates were increased 0.5% in line with the base rate

It is thought that around 12 per cent of mortgages are currently on a standard variable rate, according to UK Finance.

According to credit app TotallyMoney, someone with an average UK home costing £270,708 and a variable rate mortgage on a 25 per cent deposit faces paying £196 per month more than in November last year, once the 0.5 per cent hike is factored in.

Those on SVRs who are able to switch to a fixed product could save thousands by doing so. 

According to Rachel Springall, finance expert at Moneyfacts, the cost savings to switch from the typical SVR (5.17 per cent) to the typical two-year fix (3.95 per cent) is a difference of approximately £3,333 over two years, based on a £200,000 mortgage. 

Increases: The cost of owning a home is set to rise for some, as interest rates on new fixed-rate mortgages and existing variable rate ones will likely go up

Increases: The cost of owning a home is set to rise for some, as interest rates on new fixed-rate mortgages and existing variable rate ones will likely go up

Fixed rates

Fixed-rate mortgages are the most popular choice for homeowners in the UK, with around three quarters of residential borrowers opting for one.

Analysis by L&C Mortgages prior to the rise showed that the average of the keenest two-year fixed rate mortgages now stands at more than two per cent higher than it was at the beginning of the year.

Fixed-rate mortgages do not automatically track the base rate rise, but lenders will usually increase rates for new applicants to some degree.  

 While those on fixed rate deals will be sheltered from interest rate rises for the duration of their mortgage term, around half are expected to expire in the next two years

Those already on a fixed rate mortgage will not immediately feel the effect of the rise, as they are locked into their existing rate until the term ends.

However, the the rate hike will make it more expensive for those looking to remortgage. Around half of all fixed mortgage deals are set to expire in the next two years. 

Brian Murphy, head of lending at Mortgage Advice Bureau said: ‘While those on fixed rate deals will be sheltered from interest rate rises for the duration of their mortgage term, around half are expected to expire in the next two years. 

‘Some may therefore consider lengthening their mortgage terms or even overpay on their mortgage to help them with payments over the long term.’

You can browse rates and find the best mortgage deal for you using This is Money and broker L&C’s tool. 

First-time buyers further squeezed 

First-time buyers may particularly struggle with the rate rises, as they typically earn less and have larger mortgages than people higher up the property ladder.

Rightmove has calculated that, with the 0.5 per cent rate hike, a first-time buyer with a £224,943 home on a 10 per cent deposit mortgage on a two-year fix would see monthly mortgage payments increase to an average of 40 per cent of their gross salary, a level not seen since 2012.

 With each jump in interest rates, homeowners are contributing approximately 1 per cent extra of their gross salary on average towards a mortgage

Tim Bannister, Rightmove 

Prior to today, it said the average monthly mortgage payment for a first-time buyer household was £976. This had already increased by 20 per cent since January 2022 when it was £813.

Given the rate rise this will now increase to an average of £1,030, taking it from 38 per cent to 40 per cent of the average gross salary – a level not seen since 2012.

A 10 per cent deposit on an average first-time buyer type home is now £22,494, which is 57 per cent higher than ten years ago (£14,316) and the average asking price of a first-time buyer home is at a record of £224,943.

Tim Bannister, Rightmove’s housing expert, said: ‘With each jump in interest rates, home-owners are contributing approximately 1 per cent extra of their gross salary on average towards a mortgage.

‘Average mortgage rates for a two-year fix are just over 3 per cent compared to nearly 6 per cent ten years ago, so they are still historically low.

‘However, as they creep upwards, the large number of first-time buyers looking to move this year may look for some financial certainty by locking in longer mortgage terms.’

Will it stop people moving home?

While the base rate has been gradually increasing since November, house prices have continued to rise, stoked by sustained demand from home buyers and movers. 

According to Nationwide’s house price index, published this week, house prices rose 11 per cent in the year to July, up from 10.7 per cent in June, with the typical home now worth £271,000. 

Nathan Emerson, CEO of estate agent industry body Propertymark, said: ‘Buyers will be watching interest rates very closely, but the gradual nature of their upward trajectory from a historically low base is unlikely to be a factor that on its own has too much of an effect on the confidence of those who are serious about moving.

House price boom: Nationwide's house price index recorded an 11% rise in year to July

House price boom: Nationwide’s house price index recorded an 11% rise in year to July 

‘Potential buyers registering with our member agents have outnumbered new property listings throughout the first six months of the year, and by seven to one in June alone. 

‘During the same period the Monetary Policy Committee has raised the base rate four times.’

However, others say that further mortgage rate rises and increases in the cost of living will eventually deter some home buyers. 

Responding to the Nationwide index, leading estate agent Knight Frank said big rises in new mortgage rates meant ‘a slowdown is in the post’ for the property market. 

What does it mean for my savings?

While it is potentially bad news for mortgage borrowers, the base rate rise will be welcomed by savers who have endured rock-bottom rates for years.

Were savers to see a 0.5 percentage point rise passed onto them, someone with £20,000 put away would receive £100 more a year.

However, savers are being advised not to expect an instant improvement to savings rates, but rather a gradual rise over the coming weeks and months.

James Blower, founder of the Savings Guru said: ‘The rate hike means that we will see interest rates on savings continue to increase gently in the coming months.

‘It won’t mean we suddenly see a 0.5 percentage point increase in best buy rates, as these are already well ahead of the base rate, but we will see fixed rates continue to increase in the coming weeks.’

In other words, it will mean more of the same. The five previous base rate rises have seen rates ticking upwards over the past eight months.

Gradual rise: The base rate increase should bring slightly higher interest rates for savers

Gradual rise: The base rate increase should bring slightly higher interest rates for savers

This time last year, the average easy-access rate was just 0.18 per cent, according to Moneyfacts. Now it has risen to 0.69 per cent.

The top of This is Money’s independent best buy tables has been a hive of activity, with new market-leading rates to report almost every week.

The best easy-access deal now pays 1.8 per cent – three times more than the best rate this time last year.

The best one-year fixed deal pays 2.85 per cent, and the best two-year fix pays 3.15 per cent – the highest seen in about a decade, according to Moneyfacts.

That said, at the bottom of the savings market rates have moved little and in some cases not at all.

It has been clear that many of the big banks have no inclination at present to fight for saver cash or play fair on rates.

For example, Barclays still offers just 0.01 per cent on easy-access cash. This is just 10p on each £10,000 saved.

HSBC, Lloyds bank, NatWest and RBS all pay 0.2 per cent on their easy-access savings accounts.

Rachel Springall, finance expert at Moneyfacts says: ‘Loyal savers may not be benefiting from the base rate rises and they could be missing out on a better return if they fail to compare deals and switch.

‘Interest rates are rising across the savings spectrum. However, out of the biggest high street banks, only one has passed on all five base rate rises before now, which equate to 1.15 per cent, and some have passed on just 0.09 per cent since December 2021.

‘The patience of some savers may be wearing thin, but there is no guarantee they will see any benefit from a base rate rise.

‘Keeping abreast of the top rate tables is essential and there is little reason for savers to overlook the more unfamiliar brands if they have the same protections in place as a big high street bank.’

On the up: The best rates on easy-access accounts have now reached 1.5% or even higher

On the up: The best rates on easy-access accounts have now reached 1.5% or even higher

What about inflation?

There is no denying that rising inflation is decimating the savings Britons have stashed away.

CPI inflation reached 9.4 per cent in the 12 months leading up to June, the highest it has been for 40 years, and the Bank of England is expecting it to peak around 11 per cent in the autumn. 

If the rate paid on savings is below the CPI, savers are effectively losing money in ‘real’ terms.

Even the best easy-access deal paying 1.8 per cent is more than five times lower than the current inflation rate.

Someone saving £10,000 in this account could still expect to see the value of their savings pot in real terms fall by £760.

However, with the value of everyone’s savings falling in real terms it is arguably more important than ever to move cash to the highest paying deals.

Someone with £10,000 sitting in an easy access account paying 0.1 per cent over the past year will have seen the value of their money fall by £930.

Hypothetically, were inflation and savings rates to remain the same, someone with £10k in a 0.1 per cent deal could salvage £170 over the next 12 months by switching to the best easy-access deal.

How high will savings rates go?

We’ve already seen some big milestones reached over the past few weeks and months.

There are now a dozen easy-access providers paying 1.5 per cent or higher, with the market leading rate paying as high as 1.8 per cent.

Blower says: I don’t think we will see easy-access rates breach the 2 per cent barrier over the next few weeks.

‘Al Rayan are an outlier at 1.8 per cent with the rest of the best buy market at 1.55 per cent, but I expect that to change by the end of the week and we will quickly see consolidation of best buy easy-access rates around 1.75 to 1.85 per cent and I think we will see a best-buy with a 2 in front of it in late September or early October.’

As for fixed rates, in June we saw these deals breach the 3 per cent barrier. Since then they have continued onwards and upwards.

The top five-year fixed rate deal now pays 3.4 per cent, whilst even the best two-year deal pays 3.12 per cent.

Blower expects to see more of the same at the top of market over the coming weeks, particularly with shorter fixed term deals.

‘I don’t think long term fixed rates of three years and above will increase too much from here, says Blower. ‘I think the year end best buy five year will still be sub 4 per cent – but short term rates will rise.

‘But I expect the one-year fixed market to break 3 per cent in the autumn and we may see the best two-year deals reach 3.5 per cent.’

Unfortunately, the big banks are unlikely to change their tune though, which means a large proportion of savers will need to take action and move their money to lesser known providers to see any meaningful difference.

The amount held in accounts offering rates of 0.1 per cent or less remains at over £300billion, according to Paragon Bank’s analysis of the latest CACI data, which provides a snapshot of savings deposits held with more than 30 of the biggest banks main banks.

‘Unfortunately I don’t think we will see the big banks increase rates by much,’ says Blower. ‘I think that [the base rate rise] will force them to increase rates from where they are, but I expect them to both drag their heels on it and not pass on anywhere near the full rise.

‘Savers will need to switch to the smaller new entrants and challengers to get a good return on their savings and the financial benefit to do so will now be worth several hundred pounds a year so it is worth taking action on.’

'Just go for it': Savings expert James Blower says those looking for a better rate shouldn't spend too much time trying to 'guess' the market

‘Just go for it’: Savings expert James Blower says those looking for a better rate shouldn’t spend too much time trying to ‘guess’ the market

What should savers do?

With rate rises occurring each and every week at the top of the market, savers may feel cautious about switching due to the danger of missing out on a better deal in the near future.

With rates likely to continue moving upwards driven by competition between challenger banks, savers may be tempted to remain in easy-access deals so as to remain flexible.

However, the gap between the best one-year fix and easy-access account is now in excess of 1 percentage point, meaning now could be a good time to use a fixed deal for 12 months.

Of course, given the cost of living squeeze, it’s all the more important to have some easily accessible money to act as a financial cushion to deal with unforeseen events.

However, for those who already have a financial cushion built up and are not planning on using their excess cash in the near future, then fixed rate savings could make sense.

Blower adds: ‘If you want a fixed rate then don’t spend too much time trying to guess the market, just go for it because you’ll never call the top of it right and you’ll likely miss out on more interest trying to time the market than you’ll gain by timing it right.

‘The best one year fixed is over 1 percentage point higher than the best easy access, and that is enough of a premium to fix for that term, but I wouldn’t go beyond that.

‘If rates continue to rise, savers still have time to fix again next year at potentially higher rates when maybe a longer term will look more rewarding.’

Best mortgage rates and how to find them

Mortgage rates have risen substantially as the Bank of England’s base rate has climbed rapidly.

If you are looking to buy your first home, move or remortgage, it’s important to get good independent mortgage advice from a broker who can help you find the best deal. 

To help our readers find the best mortgage, This is Money has partnered with independent fee-free broker L&C.

Our mortgage calculator powered by L&C can let you filter deals to see which ones suit your home’s value and level of deposit.

You can also compare different mortgage fixed rate lengths, from two-year fixes, to five-year fixes and ten-year fixes, with monthly and total costs shown.

Use the tool at the link below to compare the best deals, factoring in both fees and rates. You can also start an application online in your own time and save it as you go along.

> Compare the best mortgage deals available now

Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.

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How to create a reading nook for children in your home

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Nooks to inspire a love of books: It’s easy to create a space for little ones to pick up a page-turner

  • Every child should have somewhere to fall into a book at home 
  • The ideal kids’ reading nook requires three things: comfort, secrecy, and storage 

Children’s books should be enjoyed in private. They should be read under the covers by torchlight after the grown-ups think you’ve gone to sleep; or hidden in treehouses with a supply of chocolate biscuits – anywhere where monsters, pirates and school chums can climb through the window.

Every child should have somewhere to fall into a book. A book nook, if you will. And it doesn’t take a lot of effort to create one. 

As children’s book author and critic Imogen Russell Williams says: ‘The ideal kids’ reading nook requires three things: comfort, secrecy, and convenient storage for an array of books and snacks.

Reading space: A simple small chaise longue can create a comfortable spot for young ones to enjoy books

Reading space: A simple small chaise longue can create a comfortable spot for young ones to enjoy books

‘Enclosed, cosy and full of soft, warm light, the best reading dens provide the perfect launchpad for a child’s imagination.’

Here are some suggestions.

Swathed in cotton

You can go Princess And The Pea by curtaining off a little cranny with a swirling, regal canopy from The Handmade Scandi Company. These come in pink, white, lavender or ‘cloud’ and cost £56.

For added twinkle, string fairy lights around and switch off the main light. Hey presto: stars in a night sky.

Looking for a canopy in bolder colours? The Rainforest Reading Corner Canopy from TTS Group will brighten up the reading corner (£71.99).

Inhabit an alcove

Find an existing little cranny and put it to good use. Throw in a few cushions, put up some bookshelves and string a curtain across so the mini-reader can shut him or herself away. 

The Kura bed curtain from Ikea comes with windows so your offspring can pop their head out from time to time (£25).

In their own world: Clambering into a tepee in the corner of the bedroom feels like an adventure in itself

In their own world: Clambering into a tepee in the corner of the bedroom feels like an adventure in itself

Reading tent

Clambering into a tepee in the corner of the bedroom feels like an adventure in itself. And the little reader can fall asleep among the pages. 

Argos sells a lovely bear-themed tepee made by Chad for £40. Or if you want to build a tepee together, just six bamboo poles and bedsheets held in place with clothes pegs will do the trick.

Build it

Natural light is great, especially for picture books. If you have a big window and can construct some seating around it, it makes a fab place to read of derring-do while staring out to imagine the action. If the window isn’t low down, a ladder up to the seat will add to the fun.

What goes inside

Make furniture comfy and a bit flexible. Your offspring may want to read sitting up or lying down, so some kind of small chaise longue should work well. 

The Handmade Sofa Company’s child-size chaise range is from £425. 

Or if you prefer something that looks like a miniature armchair and pouffe, John Lewis’s £72 Stardust bean bag chair and footstool will look stylish.

Add a desk, and encourage the child to respond to the book — writing their own sequel starring themselves. Ikea’s Micke costs £50.

To kit it all out in matching style, The Great Little Trading Company has a series of themed book storage boxes, display racks, rugs and bean bags. 

Or, if space is limited, you can buy ready-made seat/storage combos, such as the Children’s Bookcase from Little Helper for £97.

Savings of the week! Throws 

Snug: Oliver Bonas's Ena Blue Hand Woven Throw is reduced from £45 to £27

Snug: Oliver Bonas’s Ena Blue Hand Woven Throw is reduced from £45 to £27

You can call a throw a rug or a blanket — which takes its name from a weave first made by Thomas Blanket (Blanquette), a Flemish weaver who lived in Bristol in the 14th century.

But, whichever you choose, you are sure to be snug in bed, or on your sofa if you select one of the reduced price options in cosy fabrics.

The Cotswold Company has a moss grey, chunky-knit blanket reduced from £55 to £40. 

Wayfair’s wide range includes the Christy Oslo throw in the same chunky grey knit, down from £80 to £66.99. 

Made.com has a faux fur throw in a rich cinnamon shade down from £62 to £40. Oliver Bonas’s Ena Blue Hand Woven Throw is also reduced from £45 to £27, a cut of 40 per cent. 

Faux fur is set to be hugely popular this winter. But if you don’t feel the cold, but want to add colour to a room, Habitat’s Paloma knitted cotton throw comes in cobalt blue and saffron yellow. Its price is £17.50, a saving of £20 (argos.co.uk).

Anne Ashworth 

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DL Invest Group secures €123m financing for Polish logistics portfolio

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Macquarie Capital Principal Finance has provided €123.4m in the form of a senior secured loan to DL Invest Group. The three-year facility will be funded using capital from Macquarie’s balance sheet. The loan is secured against 10 modern logistics assets across Poland, comprising of 193,000m² constructed by DL Invest Group over the last 5 years and is fully let to major international companies.

 

Alexi Antolovich, Global Co-Head Real Estate, Macquarie Capital Principal Finance said: “This transaction demonstrates Macquarie’s ability to utilise its balance sheet to find capital solutions to support its clients, notwithstanding a challenging macroeconomic environment. This transaction involves a strong portfolio managed by an excellent team at DL Invest Group. We are pleased to support DL Invest Group’s continuous growth and believe this is the first transaction of a fruitful collaboration over the years to come.”

 

Dominik Leszczynski, CEO of DL Invest Group commented: “We are delighted to unlock capital for our next stage of growth as a tenant orientated developer and long-term investor-owner of assets. Macquarie was pragmatic throughout the process, in a period of heighted volatility for Polish capital markets. We worked together to create a bespoke transaction that allows DL Invest Group to continue its strong investing track record.”

 

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What will stamp duty changes mean for your house-moving plans?

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The headlines this week have centred on mortgage mayhem and interest rates — but there’s one piece of good news to consider.

Thousands of house buyers completing their purchases in the past seven days have already benefited from the stamp duty cut announced by Chancellor Kwasi Kwarteng in his controversial mini-Budget, and property website Zoopla says 43 per cent of all homes on the market now attract no stamp duty at all.

The Government says the cut will help stimulate the flagging economy and there are some signs that it’s working.

Savings: Thousands of house buyers completing their purchases in the past seven days have already benefited from the stamp duty cut

Savings: Thousands of house buyers completing their purchases in the past seven days have already benefited from the stamp duty cut

Rightmove says visits to its house sales adverts soared 10 per cent just after the mini-Budget and the number of sales agreed on Tuesday this week was the highest in one day since early August.

The website says this week’s fall-throughs — the number of sales collapsing — are entirely in line with long-term averages.

So with all eyes on the housing market, here’s what’s changing and what’s not…

What are the new stamp duty rates?

There’s no tax on the first £250,000 of the property price — up from £125,000. Higher priced homes are unchanged, so buyers pay 5 per cent duty of the portion from £250,001 to £925,000, then 10 per cent from £925,001 to £1.5 million. You pay 12 per cent on the price above £1.5 million.

Are they the same for first-time buyers?

They pay no stamp duty on properties up to £425,000 (previously £300,000) and 5 per cent on purchases up to £625,000 (it used to be £500,000).

After this week’s furore, will the change be reversed?

Highly unlikely. The change kicked in as the Chancellor spoke on September 23, so thousands have already benefited. 

And Liz Truss doubled down on the cut ahead of this weekend’s Tory party conference, telling the BBC she is ‘very clear the Government has done the right thing’ by taking action ‘to deal with inflation, to deal with the economic slowdown and to deal with the high energy bills’.

What will we pay to move to a new £350,000 home?

Up to £250,000 you now pay no stamp duty — a saving of £2,500 thanks to the Chancellor’s new measure. 

On the portion from £250,001 and £350,000 you pay 5 per cent, which is £5,000. So that’s £5,000 stamp duty on the whole price instead of £7,500 — saving £2,500.

Will the cut send prices soaring?

Again, highly unlikely. First, £2,500 is a handy sum but not enough to convince people not already intending to buy.

Relief: Up to £250,000 you now pay no stamp duty - a saving of £2,500 thanks to the Chancellor¿s new measure

Relief: Up to £250,000 you now pay no stamp duty – a saving of £2,500 thanks to the Chancellor’s new measure

Second, it’s a permanent cut, not the temporary holiday we saw in the pandemic, so people don’t have to rush to buy immediately. 

And, third, there are many more homes on sale today than earlier this year, so demand isn’t far ahead of supply and price rises are moderating.

Could sellers put up their asking prices?

It’s possible — and some will — but this is unwise. With fears that interest rates could hit 6 per cent next year, buyers are very cost-sensitive right now. An unreasonable asking price will mean your home sits on the shelf for months.

Will the cut be wiped out by higher interest rates?

Forty per cent of mortgage deals have been withdrawn temporarily — most will return with higher costs. 

But, remember, government figures show 36 per cent of homes are owned outright with no mortgage. 

Of the rest, it’s estimated three-quarters are on fixed interest rates so won’t see an immediate rise in costs.

For buyers from these groups, the stamp duty saving is genuine and not lost in higher mortgage repayments.

I’m planning to downsize — is there any help for me?

Afraid not. Many housing experts want stamp duty to be tapered to incentivise older owners to move to smaller homes, freeing up bigger houses for families. 

But apart from the Chancellor’s blanket change in the threshold at which duty kicks in, there’s nothing customised for the retiring or older homeowner.

Is Kwasi boosting landlords and holiday home buyers?

With the cost of living crisis, these groups aren’t seen as a priority. So while they save up to £2,500 like everyone else, the 3 per cent stamp duty surcharge on buy-to-lets and weekend cottages introduced back in 2016 stays in place. 

And, this week, Labour hinted there might be further taxes on landlords if it wins power.

What’s going on in Wales and Scotland?

Wales’S stamp duty, called the Land Transaction Tax, changes on October 10, after which there will be no tax on homes under £225,000 — up from £180,000 — with small rises for homes over £345,000.

There’s no change to Scotland’s Land and Buildings Transaction Tax, but a budget north of the border on October 24 may change all that.

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