Jeremy Hunt, appointed to replace Kwasi Kwarteng as chancellor on Friday, will make a statement later today, bringing forward measures from the Medium-Term Fiscal Plan that will support fiscal sustainability.
Tasked with reversing the government’s economic crisis, Hunt will also make a statement in the House of Commons this afternoon.
This follows the prime minister’s statement on Friday, and further conversations between the Liz Truss and Hunt over the weekend, to ensure sustainable public finances underpin economic growth.
The chancellor will then deliver the full Medium-Term Fiscal Plan to be published alongside a forecast from the independent Office for Budget Responsibility on 31 October.
The chancellor met with the governor of the Bank of England and the head of the debt management office last night to brief them on these plans.
Reflecting on the government’s change of fiscal direction and tax U-turn, Lawrence Bowles, director of research at Savills, commented: “Already we have seen long-term gilt yields fall on the back of rumours that the government will be backing down on some of Kwarteng’s unfunded tax cuts – and confirmation, as well as news of his dismissal as Chancellor, should help to push yields down further, allowing the Bank of England to slow its pace of monetary tightening and easing pressure on mortgage costs. And with more breathing room, lenders should feel the confidence to put more products back out to the market.
“As a result, we believe that some of the existing downward pressure on house prices and transactions will be tempered. That said, the market will still need to adjust to the current higher interest rate environment, though perhaps not at such an amplified level.”
In terms of Hunt’s appointment as the new chancellor, he is being encouraged to work closely with the property industry to tackle issues faced across the housing sector.
Timothy Douglas, head of policy and campaigns, said: “The ex-Chancellor, Kwarteng’s introduction of the recent review to Stamp Duty was welcomed and will help to bring people’s budgets in line with rising house prices.
“It is disappointing however to see a U-turn on keeping corporation tax low announced today which will mean that next year’s rises will see agencies and company landlords tighten their belts whilst facing other growing costs.”
Property market analyst and CEO of Twindig, Anthony Codling, points out that the departure of Kwarteng, the u-turn on corporation tax and the appointment of Jeremy Hunt did little to settle the nerves of residential investors.
He said: “Some asked if these attempts to rearrange the chairs in the cabinet were akin to rearranging deckchairs on the Titanic.
“The first challenge for Mr Hunt is to explain in detail how he will balance the books until he has done that the markets will remain unsettled, and the more markets are unsettled, the higher mortgage rates will rise.
“The second challenge he faces is to put the housing market back on an even keel. Whilst much of the recent economic turbulence can be traced back to the contents of the mini-budget, unfortunately for Hunt, the housing market started to drift south as living costs and mortgage rates started to head north.”
Can the new chancellor really get homeowners off the current economic rollercoaster?
Adrian Anderson, director, Anderson Harris, commented: “Jeremy Hunt is an experienced politician. He is likely to be seen as a safe pair of hands that can help to restore confidence and calm volatile markets. A reversal of the proposed tax cuts could take the edge off inflation and slow down some of the pressure we are seeing on rates for fixed mortgages.”