The property market is expected to gain momentum over the coming year, driven largely by anticipated decreases in average mortgage rates. This trend is predicted to unfold irrespective of outcomes from this week’s Autumn Budget, according to insights from Octane Capital.

Jonathan Samuels, CEO of Octane Capital, highlighted the cautious stance currently adopted by lenders, who appear hesitant to engage in aggressive mortgage rate competition due to the looming uncertainty surrounding the Budget announcement.

Among investors, there is palpable concern regarding potential adjustments to Capital Gains Tax (CGT), especially with speculations that Chancellor Rachel Reeves might elevate the tax rate from 24% to 40% for higher-rate taxpayers. Such a move could have a sweeping impact—yet, a glimmer of hope exists for property investors, as proposed changes may not extend to property-related gains, thus alleviating some of the pressure on buy-to-let investors.

Additionally, there are other significant tax considerations under discussion. Inheritance Tax, which currently sits at 40% for estates valued above £325,000, remains a focal point. On another front, should Labour choose not to intervene, the current elevated Stamp Duty thresholds will expire by April 2025, potentially reverting to former levels. For instance, the nil-rate band could decrease from £250,000 to £125,000 for all buyers, and from £425,000 to £300,000 for first-time buyers. If the government opts to retain the present Stamp Duty rates, the market may witness heightened activity as the 2025 deadline nears.

Market watchers are also keeping a close eye on the Bank of England, which is widely anticipated to lower the base interest rate from 5% to 4.75% this November, following a dip in CPI inflation to 1.7% in September—below the Bank’s 2% target. This trend points toward easing pressure on mortgage rates.

In September, the average mortgage rate for an 85% loan-to-value (LTV) 2-year fixed-rate mortgage stood at 4.87%. Economists, however, foresee a notable downtrend in rates over the next year. Capital Economics, a leading research consultancy, has projected that average interest rates could fall to around 4% by late next year. Meanwhile, Goldman Sachs offers an even more optimistic outlook, anticipating rates to drop closer to 3%. Averaging these forecasts, prospective homeowners with an 85% LTV mortgage on an average-priced property might see their monthly payments decrease by approximately £150.

Samuels commented on these developments, saying: “Investors are worried about the impact of this week’s Budget, largely stoked by the government’s talk of a ‘£22 billion black hole’ in public finances that they need to fix.

“With this in mind, mortgage lenders are waiting to see how the government’s announcement alters the market before they start dropping rates to gain market share.

“Obviously we hope Labour keeps tax increases to a minimum, but regardless of what happens the fundamentals of the market are getting stronger all the time.

“Landlords are making steady profits, tenant demand is as fierce as ever, and mortgage rates should start falling once the Budget is done – easing the burden on the nation’s investors as we move into 2025.”