The Mortgage Guarantee Scheme will be extended by a year to the end of December 2023, helping people with 5% deposits on to the property ladder, the UK government has announced.

Under the scheme, the government offers lenders the financial guarantees they need to provide mortgages that cover the other 95%, subject to the usual affordability checks, on a house worth up to £600,000.

Launched in April 2021, the scheme has already helped over 24,000 households. It was originally planned to close at the end of this year but will now be extended until the end of 2023.
Chief Secretary to the Treasury, John Glen MP, said:

‘For hard-working families facing today’s challenging economic conditions, it’s right that we continue to help them secure their first home or move into their dream house.

‘Extending this scheme means thousands more have the chance to benefit, and supports the market as we navigate through these difficult times.’

Internet link: HM Treasury website

Chancellor Jeremy Hunt has announced that the Spring Budget will be delivered on 15 March 2023.

Mr Hunt stated that he has commissioned the Office for Budget Responsibility (OBR) to prepare an economic forecast to accompany the Budget.

The Spring Budget will be the Chancellor’s second fiscal event, following November’s Autumn Statement. Mr Hunt used the Statement to reverse many of the tax cuts announced by his predecessor, Kwasi Kwarteng.

Internet links: UK Parliament website

The Bank of England (BoE) has raised UK interest rates by half a percentage point to 3.5%.

It is the ninth consecutive increase and takes the base rate to its highest level for 14 years as the Bank battles to stem soaring prices.

The Bank’s Monetary Policy Committee (MPC) voted 6-3 in favour of putting rates up by 0.5%. The BoE also warned that further increases may be necessary to tackle what it fears may be persistent domestic inflationary pressures from prices and wages.

Commenting on the rise, Alpesh Paleja, Lead Economist at the Confederation of British Industry (CBI), said:

‘Another big interest rate rise from the BoE doesn’t come as a surprise in the face of historically high inflation.

‘However, with global price pressures starting to wane along with the economy set to fall into recession, it is likely that we’ll see smaller interest rate rises for the foreseeable future. Nonetheless, high inflation and weakening activity will continue into 2023, putting strain on many households and businesses.’

Internet link: Bank of England website

The Institute for Fiscal Studies (IFS) has warned that household incomes will see their biggest drop in generations following the Autumn Statement.

The think tank warned that growth in living standards had been weak since 2008 and that it was now going from ‘bad to worse‘.

Paul Johnson, Director of the IFS, said:

‘Jeremy Hunt’s first fiscal event as Chancellor was a sombre affair. Surging global energy prices have made the UK a poorer country. The result is an OBR forecast that the next two years will see the biggest fall in household incomes in generations.

‘Unsurprisingly given the cost-of-living crisis, today’s Office for Budget Responsibility forecast suggests that this is going from bad to worse. This year we are set to see the largest fall in real household disposable income per head since the late 1940s

‘As ever, the forecasts are uncertain. The government’s finances could end up much healthier than expected. But if the outlook deteriorates further then Jeremy Hunt really has not left himself with much room to manoeuvre.’

Internet link: IFS website

The UK economy is to suffer the biggest hit of all the G7 nations next year, according to a report from the Organisation for Economic Cooperation and Development (OECD).

The OECD forecasts that the UK’s GDP will reduce 0.4% next year and grow 0.2% in 2024. This is better than previous OECD predictions which has been for the economy to remain static.

The only other G7 economy to contract next year is Germany’s. which will experience a smaller contraction of 0.3%.

Growth will be small in the majority of the G7 nations. Italy’s GDP will grow 0.2%, the US will see 0.5%, France will experience 0.6% while Canada and Japan will see rises of 1% and 1.8% respectively.

The government’s Energy Price Guarantee scheme will increase inflation, requiring hiked interest rates which will result in higher borrowing costs, said the OECD report.

Mathias Cormann, OECD Secretary-General, said:

‘The global economy is facing serious headwinds. We are dealing with a major energy crisis and risks continue to be titled to the downside with lower global growth, high inflation, weak confidence and high levels of uncertainty making successful navigation of the economy out of this crisis and back toward a sustainable recovery very challenging.

‘An end to the war and a just peace for Ukraine would be the most impactful way to improve the global economic outlook right now. Until this happens, it is important that governments deploy both short- and medium-term policy measures to confront the crisis, to cushion its impact in the short term while building the foundations for a stronger and sustainable recovery.’

Internet link: OECD website