U-turn Emergency Statement

U-turn Emergency Statement

11:42 AM, 17th October 2022, About A year ago 8

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Under pressure from the nervous financial markets and having been locked away in Chequers at the weekend with PM Lizz Truss, the Chancellor of the Exchequer, Jeremy Hunt has given an emergency statement to the country.

This is an effort to stabilise the markets and inject some confidence, credibility and trust globally in the UK and its financial institutions as a safe market to purchase debt.

Reversing almost all measures from the mini-budget

The basic rate of income tax will now remain at 20% indefinitely and not be cut to 19p in April 2023

Corporation tax will rise as planned in April 2023 from 19% to 25%

The top rate of income tax over £150,000 will not be cut and will remain at 45%

The Energy price cap will now only be guaranteed for homes and businesses until April 2023 and will be reviewed to decide how a more cost-efficient measure can be put in place for the longer term and not expose the economy to the cost of volatile energy prices.

Dividend tax rates will no longer be cut

Off-payroll working reforms will be reversed,

A new VAT-free shopping scheme for non-UK visitors

Alcohol duty rates have been unfrozen

Jeremy Hunt said: “As I promised at the weekend, our priority in making the difficult decisions that lie ahead will always be the most vulnerable and I remain extremely confident about the UK’s long-term economic prospects as we deliver our mission to go for growth.”

Hunt went on to say for the benefit of the markets that the UK would always pay its way.

However, the Stamp duty cuts for Home buyers are planned to be kept for now but could fall under review

Additionally, the National Insurance increase planned by Rishi Sunak is still to be scrapped

Markets have reacted positively

The yield on 30 year Bonds has fallen further today post statement to 4.35% and five-year Bond prices which affect more closely similar term fixed rate mortgages fell to 3.86%

Currently Sterling has rallied to $1.13, but this will remain a volatile market.

 


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Comments

Neil Patterson

11:55 AM, 17th October 2022, About A year ago

Cost saving wise the backtrack on the two-year energy price cap commitment is potentially the biggest news.

Reluctant Landlord

12:59 PM, 17th October 2022, About A year ago

Hunt becomes the hunter.
A flailing machete to the PM's economic plans.
Where does the blade swipe next?
I have a feeling Truss is about to be 'Marie-Antoinette'd' ....
BBC Chris Mason's very mild analysis... ' What a day. And it’s not even lunchtime'..

Neil Patterson

13:21 PM, 17th October 2022, About A year ago

CEO of Alliance Fund, Iain Crawford, commented:

“Although today’s U-turn is an attempt to calm the waters, it’s fair to say that the government’s shambolic behaviour is unlikely to distil much confidence in the UK economy.

However, as it stands, the UK public will embrace any shred of stability afforded to them in what are currently very uncertain times and the one silver lining of this latest government backtrack should be a boost to property market confidence.

We’re already seeing a strengthening of the pound with gilt yields also dropping and this easing pressure on the markets should reduce the likelihood of higher interest rates.

This will help settle what has been a turbulent mortgage market in recent weeks, rejuvenating buyer demand levels, which will also help to stabilise house prices and investment into the UK property market.”

Director of Benham and Reeves, Marc von Grundherr, commented:

“An extraordinary turn of events, quite literally, but one that should help strengthen a property market that was starting to wobble under the pressure of increasing mortgage rates and dwindling buyer sentiment.

While maintaining a cut to stamp duty will help stimulate buyer demand within the market, overall market health will be far better maintained by stabilising the mortgage sector and our ability to fund a property purchase in the first place.

We should now see this with pressure easing, making the threat of further mortgage rate increases over the coming months less likely.”

James Forrester, Managing Director of Barrows and Forrester, commented:

“It’s impossible to tell just what direction the economy will head following the latest government spectacle, but today will bring an air of positivity to what was quickly becoming a beleaguered property market.

Stability in the gilt markets will bring positive movement for those looking to borrow. But it’s important to understand that we aren’t going to return to a sub one per cent base rate and homebuyers must be prepared to pay more in mortgage costs when climbing the ladder.

However, the government’s choice to maintain the cut to stamp duty tax signals their intent to keep the property market buoyant and this should help boost buyer confidence in itself.”

Managing Director of HBB Solutions, Chris Hodgkinson, commented:

“A case of too little, too late, where the UK property market is concerned as the damage has already been done to homebuyer sentiment, as well as their ability to borrow in order to fund their purchase.

Even if we do now see mortgage rates level out, many will be far too worried to proceed with a purchase in fear of another government U-turn further down the road, leaving them unable to afford the cost of their mortgage.

As a result, we can expect market activity to remain muted over the coming months, causing house prices to drop as a result.”

JB

13:25 PM, 17th October 2022, About A year ago

Would anyone like to make any mortgage rate predictions?

Reluctant Landlord

16:08 PM, 17th October 2022, About A year ago

Reply to the comment left by JB at 17/10/2022 - 13:25
easier to predict the the probability of the Queen being found sharing a burger with Elvis.

Mark Alexander - Founder of Property118

0:16 AM, 18th October 2022, About A year ago

Reply to the comment left by DSR at 17/10/2022 - 16:08
My guess is 4% on November 3rd

Peter G

13:18 PM, 22nd October 2022, About A year ago

Pound bouncing between 1.11 and 1.13 and FTSE still below 7,000 so clearly Hunt's U-turn had no beneficial effect, just hammered all tax payers, taking away their means to fight against the Recession and stop their buinesses going bankrupt. But then China would like that wouldn't they.. To coin a phrase.... if he had a brain he'd be even more dangerous.

Mark Alexander - Founder of Property118

13:46 PM, 22nd October 2022, About A year ago

Reply to the comment left by Peter G at 22/10/2022 - 13:18
I don’t think it’s quite as simple as that. The U-turns happened the day after the BoE stopped printing money to sure up the bond markets against speculation. The rescue of the £ was not completed with both events.

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