Budget 2026: mortgage rates and mansion tax – expert comment

Ahead of the Autumn Budget on Wednesday 28 October, Dr Alexandros Skouralis, Lecturer in Real Estate and Finance at Henley Business School, unpacks the mansion tax, calls to scrap stamp duty and what global politics means for mortgage repayments.

Mansion tax: an easy political win with modest returns

For Labour, the political arithmetic is attractive as more than 99% of homes in England would be unaffected. Buyers are likely to factor future annual tax bills into their offers, reducing what they are willing to pay. However, these adjustments would be concentrated in a small, expensive segment of the market, suggesting a limited effect on house prices overall. The government can argue that the mansion tax makes property taxation more progressive while generating recurring revenue from an immobile tax base. However, two practical challenges stand out. First, some households are asset-rich but income-poor. Second, high-end properties can be difficult to value accurately, creating scope for disputes and appeals, particularly around the charging thresholds. Overall, the policy delivers a visible political message and a modest improvement in property taxation. But with expected annual revenue of around £430 million, its fiscal contribution is limited, and it does little directly to address the shortage of homes.

Stamp duty: easy to promise, costly to deliver

Scrapping stamp duty on main homes is an attractive opposition promise. For Conservatives seeking to rebuild electoral support, the appeal is clear as 65% of households in England own their home, giving the policy a substantial potential audience. There is a sound economic case for reform. By taxing transactions, stamp duty increases the cost of moving, discouraging downsizing and relocation for work and leaving homes less well matched to households’ needs. However, delivering abolition is harder than announcing it. The Conservatives’ original costing put the annual cost at £9 billion by 2029-30, requiring substantial spending cuts or replacement revenue. Funding is not the only issue. First, first-time buyers who already pay no stamp duty would receive no direct saving and would lose their relative advantage over home movers. Second, who ultimately benefits depends on how prices respond. Where housing supply is constrained, buyers’ increased purchasing power could feed into higher prices, allowing sellers to capture a substantial share of the saving.

Mortgage rates: how global politics affect your monthly repayments

Borrowers leaving cheap fixed deals face a different market. Average advertised five-year rates have risen from 2.55% in October 2021 to around 6% this October. On a £300,000 repayment mortgage with 25 years remaining, that means approximately £1,350 versus £1,950 a month, so around £600 more, before fees, holding the balance and term constant. Ahead of the Bank’s 5 November meeting, Bank Rate stands at 3.75%. New fixed mortgage rates also reflect expected future rates, funding costs and compensation for risk. Middle East conflict and Trump’s changing policies influence these through energy prices, inflation and global markets. Fixed rates can therefore rise while Bank Rate stays unchanged or fall after a smaller-than-expected increase if markets anticipate a lower future rate path than previously expected. UK policymakers can influence mortgage costs but cannot control global shocks. A credible, funded Budget that avoids adding to inflation offers a stronger foundation for affordability than promises of immediate relief.

To speak with Dr Alexandros Skouralis, contact pr@henley.ac.uk.