Slower growth than expected sets the scene for a landmark address
2:59 p.m. GMT: We're wrapping up our live blog after an eventful day in the House of Commons – but our coverage will continue throughout the day.
First up: more on the government's controversial new "mansion tax," a measure that's unsurprisingly already generating plenty of debate across the mortgage industry.
Thanks for following, and stay tuned for all the latest on the Budget fallout from the team at Mortgage Introducer!
2:18 p.m. GMT: Markets give Reeves budget a cautious thumbs-up
Bond yields wobbled on Wednesday afternoon as Rachel Reeves delivered her budget speech, but there was no sign of a sharp selloff as traders reacted calmly to the plan.
Keeping financial markets onside had been a key priority for the chancellor ahead of Wednesday's address, and she appeared to do her job – thanks in no small part to a higher budget surplus projection than expected, even if growth forecasts for the year ahead were downgraded.
On the outlook for mortgage rates, much will depend on the Bank of England's plans for its next announcement, but there seems little immediate chance of a steep rise in borrowing costs in the wake of today's speech.
1:56 p.m. GMT: Badenoch blasts budget as 'smorgasbord of misery'
Opposition leader Kemi Badenoch described Reeves' plan as a "budget for Benefits Street paid for by working people" with a "laundry list of excuses."
She called for the chancellor's resignation, claiming her budget marks a second consecutive year of big tax hikes. "Last year she put up taxes by £40 billion, the biggest tax raid in British history," Badenoch said. "She swore it was a one-off. Today, she has broken every single one of those promises."
1:39 p.m. GMT: Gilt yields on the way down again as markets await clues on BoE's next steps
Ten-year UK gilts slid again after an early-afternoon runup, with attention now turning to the potential impact of the government budget on the Bank of England's next steps.
The OBR expects inflation to be slightly higher in the long run than it had first anticipated – but it's also downgraded its growth forecast for the UK economy, potentially increasing the need for further central bank cuts.
Investors and financial markets will be keeping their ears to the ground in the hours ahead for any public comments from Bank of England officials on their next move after Reeves' statement.
1:27 p.m. GMT: Reeves confirms mansion tax plans
It was already detailed in the OBR's much-discussed leaked forecast – but Reeves has now confirmed the government will introduce a mansion tax for homes worth more than £2 million.
That will amount to a £2,500 annual charge for those properties, she said, rising to £7,500 for properties valued at over £5 million. Her rationale: a band D home in Darlington pays £300 more in council tax, she said, than a £10 million Mayfair property.
1:22 p.m. GMT: 'Wealth exodus' on the way?
Financial advisor firm deVere Group's chief executive officer Nigel Green blasted the "shambolic" leak of the OBR report before Reeves's speech. "You can't tell the world you want to stabilise the UK economy and then allow the centrepiece fiscal document to appear online by accident," he said.
"That extraordinary kind of lapse signals operational weakness. Investors and high earners will be seeing it as a warning about the government's overall direction."
And Green believes the multi-year income tax threshold freeze could drive business and top earners out of the UK. "When a government fixes thresholds while inflation and wages rise, it quietly increases tax every year," he said. "People who generate significant economic activity can relocate easily. They analyse long-term patterns, not political slogans."
1:11 p.m. GMT: Mansion tax fallout continues
More mortgage industry reaction from the government's new mansion tax is rolling in. OnTheMarket president Jason Tebb slammed that measure as one that's likely to hit London and the South East hardest.
"The market is now being faced with distorted buyer behaviour, price stagnation at the top end, and a ripple effect across the wider market," he told MI. "Ironically, it could even undermine the very tax revenue it aims to raise as transactions drop in response.
"Those who will be hit hardest are retirees or long-term owners who bought their homes decades ago. Their propety value may have doubled or trebled, but their pension income has not. They could now be facing tax bills that exceed their disposable income."
Tebb echoed the view of other industry members that a "ceiling" effect just below the £2 million mark could emerge, with sellers forced to reduce asking price to make the property attractive to buyers avoiding the surcharge. "This was the effect of historic Stamp Duty 'ceilings' in which properties above £250,000 saw a straight jump from 1% to a 3% rate," he said, "so buyers were offering £249,999 on propeties on the market for as much as £270,000."
1:08 p.m. GMT: Yields whipsaw as markets react
Financial markets' early optimism on the budget appears to have faded as bond traders react to a chaotic few hours.
A higher-than-expected budget surplus margin seemed to have found favour in bond markets as government yields plunged - but they've since climbed higher as market watchers weighed the impact of downgraded economic growth forecasts.
Keeping the bond market happy - and borrowing costs in check - was seen as an important consideration for the government ahead of today's announcement. Reeves has just addressed the issue of the UK's net financial debt, saying it will total £2.6 trillion before the budget balance recovers to a surplus of £3.9 billion by 2028/29.
12:51 p.m. GMT: ISA allowance cut, with a twist
Reeves said she's keeping the £20,000 ISA allowance, but there's a catch: £8,000 of that is being designated for ISAs with stocks and shares. That's because many people would be better off if they'd invested in stocks and shares, she says, rather than a cash ISA. For the over-65s, the full cash allowance has been retained.
12:48 p.m. GMT: More details from huge OBR leak
Other developments from the OBR's accidental budget leak this morning: taxes are projected to rise to 38% of GDP by 2030-31, a new record, although higher-rate and additional-rate income tax thresholds are also to be frozen until then.
The two-child limit in universal credit is being lifted, while tax rates on dividends, property and savings income will jump by two percentage points.
12:40 p.m. GMT: Budget measures 'deeply damaging and counterproductive'
Eccord founder and managing director Jo Eccles blasted the government's "continued pursuit of those with wealth" after the mansion tax plans were leaked.
"It doesn't just impact the ultra-wealthy who are highly mobile and now have another reason to move elsewhere, at a significant loss to the UK economy," Eccles said. "With the threshold set at £2 million, this measure directly impacts London's upper-middle classes, who are typically households with mortgages and finite resources.
"Their outgoings can only stretch so far. Sentiment and morale are being pushed even lower, and many of them no longer view the UK as a place for prosperity where hard work and success are encouraged."
Eccles highlighted a £30,000 annual bill for someone buying a £5 million property. "One city professional told me recently that VAT on school fees alone is costing him an extra £700 a month," she said, "and if a mansion tax is added on top he will move to Switzerland. For many like him, this will be the final straw."
She warned of a potential "cliff edge" at the £2 million mark, and said the move could effectively freeze the market just above it. "We could see pressure on properties above those levels as sellers are forced to shoulder part of the burden by reducing their asking prices," she said.
"And what about tenants? If this tax is collected through council tax then the liability will sit with them, pushing rents down and further discouraging landlords to stay in the market."
12:33 p.m. GMT: Mansion tax seemingly on the way
Of note for mortgage brokers and homeowners: a rumoured new tax for houses valued at more than £2 million looks to be on the way, described in the OBR report as a "high value council tax surcharge on properties worth over £2m, raising £0.4bn."
That's a measure that will have a "significant impact" on the country homes market in the South East, according to Jennie Hancock, founder and director of West Sussex buying agency Property Acquisitions.
"Properties priced between £2 million and £4 million are already struggling," she told MI. "I'm seeing discounts of as much as 25% for beautiful country houses that buyers would have been queuing up for just three or four years ago.
"Even with significant price cuts, there's very little genuine interest. I expect this to worsen, creating a two-tiered market in which demand for higher-value properties falls even further, while the £1 million to £1.7 million price bracket becomes more buoyant."
The one silver lining for Hancock? "The tax won't come into effect until 2028, which leaves a decent window for downsizers to make their move. I expect many will, even if they have to take a hit on the price. Retirees on fixed incomes won't want the burden of an additional annual bill they haven't factored into their long-term plans."
12:30 p.m. GMT: Borrowing costs slide as bond markets react positively to leaked plans
The OBR's forecast says the UK's budget surplus margin has jumped to £21.7 billion, well above the £9.9 billion forecast in March, in a change that's being welcomed by investors and bond markets.
Appetite for UK government bonds is soaring as a result, with the yield on 10-year gilts slipping by five basis points to 4.44% at time of writing.
12:26 p.m. GMT: OBR also ups its inflation expectations
In March, the OBR said it expected inflation to end the year at 3.2%. Now, it's raised that forecast to 3.5%, while 2026 is also set to see a higher-than-expected consumer price index (CPI): 2.5%, compared with earlier projections of 2.1%.
12:25 p.m. GMT: Pre-budget chaos: OBR unexpectedly releases forecast, expects lower growth
Huge pre-budget news already with the Office for Budget Responsibility (OBR) publishing its forecast for the UK economy, a release that may have been in error. The headline news: GDP is expected to grow by less than initially expected, with the OBR forecasting 1.5% growth over the next five years compared with its March projection of 1.8%.
Income tax thresholds, meanwhile, look set to be frozen until the end of the 2030/31 financial year - an extension by three years - while a new tax for electric vehicles is on the way.
In pre-budget Prime Minister's Questions, opposition leader Kemi Badenoch has already labelled the pre-budget leak a "complete shambles," and described the buildup to Reeves' speech as "chaotic."
12:10 p.m. GMT: After weeks of speculation, leaks and rowbacks, chancellor Rachel Reeves will deliver a landmark budget address this afternoon, laying out spending and tax plans that could have massive implications for the UK mortgage market and industry.
Investors and bond traders have been on tenterhooks ahead of the long-awaited announcement, with Reeves facing a difficult balancing act as she bids to reassure financial markets about the UK economy’s long-term stability while also keeping tax hikes and spending cuts under control.
Mortgage professionals, homeowners and hopeful buyers, meanwhile, are also keeping a close eye on proceedings to see what the government’s budget has in store on the housing front – and whether new taxes or homebuyer incentives could be in store.
There was drama on Wednesday afternoon even before Reeves stepped forward in the House of Commons, with the Office for Budget Responsibility (OBR) publishing – seemingly in error – its forecast for the public finances and the UK economy well ahead of Reeves’ budget.
Our live blog will keep you posted with all the updates as Reeves delivers one of the most consequential UK budgets for years.
