This is the positive side for the housing market, with the prospect that the current low interest rates can be sustained until the economy starts to recover.
However, on the flipside, the new bank levy on bank assets above their tier-one capital requirement will undoubtedly affect lending levels in both the housing market and the SME sector. On balance, the two countervailing forces will mean that the mainstream housing market is likely to remain subdued for the next year as consumer confidence remains weak in part due to the VAT increase while lending levels are also unlikely to recover quickly.
Lenders will need to retain the high level of margins they have established over the last two years and competition is unlikely to be fierce for customers’ business. It is certainly still a lender’s rather than a borrower’s market.
The CGT rise was a compromise between a higher rate with indexation and the perception that this would lower the tax take overall. Its effect on the second-homes market will not be that great as most buyers of second homes are not concerned with selling them yet but should lead to more active management of the first-home election.
In the buy-to-let sector, the higher rate will act as a disincentive to the short-term investor whose return has been dominated by capital growth while leaving the yield investor with solid portfolio placement unaffected. One last thought on CGT is that in attacking one planning opportunity, the Chancellor has created another for both the second homeowner and the small BTL investor.
On the face of it, if you manage your income below the higher-rate threshold in the year that you sell, you can still benefit from the lower 18 per cent rate. It is great if you have just retired and want to sell a second property or BTL.