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Hunt’s Budget raid has killed the holiday home dream – unless you have one thing | Personal Finance | Finance
Having a second home in a coastal town in rural idyll was always a luxury, and in a crowded island like ours, controversial, too. Locals regularly complain that their lives have been ruined by tourists, holiday homes and Airbnb. Too many cannot afford to buy a home in a town they grew up in.
Some towns are full of empty second homes while locals are forced to live in car parks.
On the other hand, owners who rent out their holiday homes draw a steady stream of visitors into parts of the country that have few other sources of income.
Second homeowners also spruced their properties up, in a way that locals could rarely afford to do, helping to revive and prettify our towns.
Everything from old fishing villages in Cornwall to decaying Victorian resorts have benefited from the influx of buyers with money to spend.
Last week’s budget may put a stop to that.
The chancellor’s decision to abolish the furnished holiday lettings regime from April 2025 is a killer blow for Brits who wanted to buy a holiday home and partly cover the cost by renting it out when not using it themselves.
Hunt has ended all the tax breaks that made this a better move than buy-to-let.
Holiday homes sales and prices could now plunge. Hunt could also trigger an exodus of holiday let owners.
But not all of them.
Currently, around 127,000 owners of furnished holiday lets can deduct the full cost of mortgage interest payments from their rental income, even if they pay tax at 40 percent or 45 percent. Plus they only pay 10 percent capital gains tax (CGT) when they sell.
This gave them the edge over buy-to-let landlords, who can only claim a 20 percent credit towards mortgage interest, and typically pay 28 percent CGT.
Many buy-to-let landlords shifted into the holiday let market to take advantage.
From April next year, holiday home tax breaks will go. Shaun Moore, tax and financial planning expert at Quilter, said the average holiday let owner will pay £2,835 a year in extra tax as a result.
This is based on a property purchase £350,000 with a mortgage at 4.5 percent and £20,000 a year rental income.
Ben Edgar-Spier, head of regulation and policy at Sykes Holiday Cottages, said holiday let owners have been “unfairly scapegoated” by Hunt. “Squeezing holiday let owners will not solve the housing crisis but could hit tourism, jobs and businesses in tourist areas.”
He pointed out that an estimated 1.4 million empty second homes that contribute nothing to local economies have escaped Hunt’s raid.
Sean McCann, chartered financial planner at NFU Mutual, said the changes will have unintended targets, such as farmers who have diversified to offer holiday accommodation on their farm. “People letting out holiday homes will lose another tax benefit, as they can base pension contributions on their profits, and claim tax relief.”
READ MORE: Yorkshire cracking down on holiday lets as seaside towns overrun with tourists
Savvy owners who have incorporated their property in a limited company will not be affected by the changes, said Chris Sykes, technical director at mortgage brokers Private Finance. “This will incentivise more landlords to own their holiday let in a company structure rather than a personal one.”
Hunt will also reduce CGT on second home sales from 28 percent to 24 percent, to encourage holiday and buy-to-let owners to sell up.
North London estate agent Jeremy Leaf said this may increase the number of holiday rental and buy-to-let sales, as owners take the opportunity to exit in case a potential Labour government hikes CGT in future.
But it may cause more problems than it solves. “It could further reduce the availability of rental property and push up rents, making it more difficult for tenants and young people in particular.”
It could also make staycations more expensive. Holiday prices in Cornwall have soared after the local council introduced controls on holiday homes.
Hunt did nothing on Wednesday to solve the underlying issue, that we cannot build enough homes for our rapidly expanding population.
The holiday home dream isn’t completely dead. There’s just one thing you need. Bags of money.
Wealthy buyers who can afford to keep a holiday home purely for their own use, without renting it out, will not be affected by his reforms.
So while there may be fewer busy holiday lets and holidaymakers, there will be just as many empty second homes. This could make our seaside a little less livelier and less profitable too. While killing off a dream that sustained millions.
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As we look ahead to 2024, many homeowners and prospective buyers are wondering what to expect when it comes to mortgage rates. The landscape of the housing market is constantly changing, so it’s important to stay informed about trends and predictions. In this blog post, we will discuss some factors that could impact mortgage rates in 2024 and what homeowners and buyers can expect.
One factor that could impact mortgage rates in 2024 is the overall state of the economy. If the economy is strong and growing, we may see higher mortgage rates as the Federal Reserve looks to combat inflation. On the other hand, if the economy is stagnant or in a recession, we may see lower mortgage rates as the Fed looks to stimulate growth. It’s important to keep an eye on economic indicators such as GDP growth, unemployment rates, and inflation to get a sense of where mortgage rates may be heading.
Another factor that could impact mortgage rates in 2024 is Federal Reserve policy. The Fed plays a key role in setting interest rates, and their decisions can have a ripple effect on mortgage rates. If the Fed decides to raise interest rates in response to inflation, we may see an increase in mortgage rates. Conversely, if the Fed decides to lower interest rates to stimulate growth, we may see a decrease in mortgage rates. Keeping up with the latest news and announcements from the Fed can give homeowners and buyers a sense of where mortgage rates may be heading.
In terms of specific cities and local mortgage companies, it’s important to note that mortgage rates can vary depending on location and lender. For example, in a city like New York City, where real estate prices are high, mortgage rates may be higher compared to a city like Indianapolis, where real estate prices are lower. Additionally, local mortgage companies may offer competitive rates and terms compared to national lenders. For example, in New York City, local lenders like Quontic Bank and CrossCountry Mortgage may offer specialized products and services tailored to the needs of local buyers.
It’s important for homeowners and buyers to shop around and compare rates from multiple lenders to ensure they are getting the best deal. Websites like Bankrate and LendingTree can be helpful resources for comparing rates and terms from multiple lenders. Homeowners and buyers should also consider working with a mortgage broker who can help them navigate the lending process and find the best mortgage product for their needs.
In conclusion, predicting mortgage rates in 2024 is not an exact science, but there are several factors that could impact rates. By staying informed about economic indicators, Federal Reserve policy, and local market trends, homeowners and buyers can make informed decisions about their mortgage. Shopping around and comparing rates from multiple lenders is key to ensuring you are getting the best deal on your mortgage. Whether you’re looking to refinance your existing mortgage or buy a new home, it’s important to stay informed and be proactive in managing your mortgage.
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