Autumn Budget 2025: What It Means for UK Property and Mortgages

Chancellor Rachel Reeves delivered her latest budget this week, introducing several measures that will directly affect homeowners, property investors, and those looking to get on the property ladder. Cedar Crest has analysed the key changes to help you understand what matters most for your property and mortgage decisions.

High-Value Property: The New Mansion Tax

The most significant property measure is the introduction of a council tax surcharge on high-value properties:

Property value    Rate of annual tax

£2m - £2.5m      £2,500

£2.5m - £3.5m    £3,500

£3.5m - £5m      £5,000

£5m+            £7,500

What this means: If you own or are considering purchasing a property above these thresholds, particularly in London and the South East, you'll face a substantial new annual cost. The £2 million threshold was set specifically to avoid excessive impact on the London market, but this still represents a meaningful change to the economics of high-value property ownership.

For those with properties near the £2 million mark, there may be some market distortion as buyers become more cautious about crossing this threshold.

Property Income Tax Changes

The basic and higher rates of tax on property income will increase by two percentage points each. This also applies to dividend and savings income.

• Impact on landlords: If you're a property investor, your rental income will be taxed at higher rates, reducing net returns. Combined with other recent changes to mortgage interest relief and increased regulations, this continues the trend of making buy-to-let less attractive from a pure tax perspective.

  Planning consideration: Now is a good time to review your property portfolio strategy and ensure your financing structure is as tax-efficient as possible.

First-Time Buyers: A Glimmer of Hope

The government will publish a consultation in early 2026 on implementing a new, simpler ISA product specifically to support first-time buyers.

Whilst details remain scarce, this signals government recognition that getting on the property ladder remains challenging. The new product could provide a more straightforward savings route for deposits, though we'll need to wait for the consultation results to understand the full benefits.

Mortgage Affordability: Mixed Signals

Several budget measures will indirectly affect mortgage affordability:

Positive factors:

• Energy bills to fall by £150 following the scrapping of the Energy Company Obligation scheme

• Income tax and NI rates frozen (though thresholds remain frozen, affecting take-home pay over time)

• Fuel duty frozen until at least September 2026

Challenging factors:

• Inflation forecast at 3.5% this year, above the Bank of England's 2% target

• Growth downgraded for 2026 onwards, suggesting continued economic uncertainty

• Frozen tax thresholds mean fiscal drag will reduce real disposable income for many

What this means for borrowing: The slightly hotter inflation picture could influence the Bank of England's interest rate decisions. Whilst rates have been coming down, persistent inflation may slow the pace of cuts, affecting mortgage rates throughout 2026.

Economic Outlook and The Property Market

The Office for Budget Responsibility forecasts growth of 1.5% this year but has downgraded expectations for subsequent years. Combined with inflation running above target, the economic backdrop suggests continued caution in the property market.

Key indicators to watch:

• Government borrowing projected to fall from £138.3 billion in 2025-26 to £67.2 billion by 2030-31

• Public finances expected to reach surplus by 2029

• Economic stability should support steady mortgage rates, but don't expect dramatic falls

Remortgaging Considerations

With approximately 1.6 million fixed-rate mortgages due to expire in 2025, many homeowners will be remortgaging onto higher rates than they've been used to. The budget doesn't provide direct relief, but the overall economic stability measures should prevent further significant rate increases.

Our advice: If your fixed rate is ending in the next 6-12 months, speak to us now. Whilst rates may continue to ease gradually, locking in a competitive rate sooner rather than later provides certainty in your household budgeting, especially given the inflation outlook.

Property Investment Strategy

For existing and prospective landlords, the combination of higher property income tax rates and the new mansion tax on premium properties creates a more challenging environment.

Consider:

• Whether your current financing structure optimises tax efficiency

• If properties near the £2 million threshold might see reduced buyer demand

• How rental yields stack up against other investment options given the tax changes

• Whether incorporating your property portfolio might offer advantages

Regional Investment Opportunities

The budget includes substantial regional funding that could affect local property markets:

• £13 billion of flexible funding for seven regional mayors for infrastructure and skills

• Specific investments in Wales (AI growth zones) and Scotland (low-carbon technologies, infrastructure renewal)

These targeted investments could support property values in specific regions as employment and infrastructure improve, though the effects will take time to materialise.

What Should You Do Next?

The property and mortgage landscape continues to evolve. Here's how Cedar Crest can help:

• If you're a homeowner: Review your mortgage deal, especially if your fixed rate expires soon. We can help you secure competitive rates and structure your borrowing optimally.

• If you're buying: Understand how the new mansion tax might affect your target price range, and factor in the economic outlook when determining affordability.

• If you're a landlord: Consider a portfolio review to ensure your property investments remain tax-efficient and profitable under the new rates.

• If you're a first-time buyer: Keep an eye on the ISA consultation in early 2026, and speak to us about the best mortgage products for your circumstances.

The autumn budget didn't introduce dramatic changes to the mortgage market, but the cumulative effect of property tax increases, inflation concerns, and frozen income tax thresholds means careful planning is more important than ever.

Get in touch with Cedar Crest today to discuss how these budget changes affect your specific property and mortgage situation. Our team is ready to help you navigate the evolving market and secure the best possible outcome for your circumstances.

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Your home may be repossessed if you do not keep up with repayments. This analysis is based on current government announcements and is for informational purposes only. Mortgage and property decisions should be made following professional advice tailored to your individual circumstances.