Conservatives pledge to reform housing market

The Conservative party has outlined plans in its manifesto to reform the housing market by focusing on FTBs and improving terms for renters.

At the party’s manifesto launch on Sunday, prime minister Boris Johnson said the party will ‘forge a new Britain’ if they ‘get Brexit done,’ and announced many other pledges that would be sure to have an impact on personal finances around the UK.

With Labour announcing new plans to bring in rent controls, the housing market looks set to be an important battleground in the upcoming General Election, according to the investment specialists, AJ Bell.

“Johnson previously put helping FTBs and reforming the sluggish housing market front and centre in his campaign to be prime minister,” commented AJ Bell personal finance analyst, Laura Suter.

“But rather than cutting stamp duty for everyone buying homes worth up to £500,000 – his previous pledge – instead the Tories will focus more on FTBs, including looking at an alternative to Help to Buy and improving terms for renters.

“The Conservatives also pledged to encourage the mortgage industry to increase the availability of long-term, fixed-term mortgages for FTBs, in particular for those with small deposits. This borrows an idea from the US, where 30-year mortgages are more normal.

“However, a significant mental shift is required for Brits to sign up to these long-term mortgages, as even 10-year deals are rarely used in the UK – in part because of the often eye-watering exit penalties should you want to get out early.”

Other policies announced by the Conservatives include a ‘triple tax lock,’ – ruling out increases in the headline rate of income tax and National Insurance and VAT, for five years, and also a rise to the National Insurance threshold to £9,500 in 2020 – with an ambition to raise it further to £12,500.

Suter added: “The Tory manifesto makes clear that they would raise the threshold at which you pay the tax from the current £8,632 to £9,500 in 2020-21. Despite Johnson previously pledging the £2.5bn plan would save taxpayers £500 a year, this initial move will save between £85 and £100, depending on whose estimates you believe.

“It’s quite a shift from Johnson’s previous pledge to move the rate at which people pay the 40% rate of income tax from £50,000 to £80,000, which would only benefit those earning (above) £50,000.

“By shifting National Insurance rates rather than income tax thresholds, Johnson extends the giveaway to the lowest earners, in particular those earning less than the current £12,500 personal allowance.”

AJ Bell suggested another key area in the election campaign will be the policies surrounding the State Pension. The Conservatives had already revealed plans to increase the State Pension Age earlier this year, while Labour has announced a policy to freeze the State Pension Age should they get into power after the 12 December election.

“Perhaps the big question on pensions was whether the Conservatives would follow Labour down the state pension rabbit hole and make a big state pension offer,” said AJ Bell senior analyst, Tom Selby.

“The fact the state pension age isn’t mentioned at all in the Conservative manifesto document suggests the Tories have no intention of altering the existing timetable of increases after Labour pledged to freeze the state pension age at 66. Under these plans, the state pension age will rise to 67 by 2028, and 68 by 2039.

“This sets up the state pension as arguably the key battleground of this election campaign besides Brexit.”

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