Will Rachel Reeves’ Tax Plans
Derail the UK Mortgage Recovery?

UK mortgage activity has picked up into autumn — purchase approvals reached roughly 65,900 in September — while Bank Rate sits at 4.00%. With the Autumn Budget due on 26 November, the big question is whether potential tax changes targeting wealth and property could slow the recovery or simply re-shape demand.

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What is moving UK mortgage pricing

Two forces matter most right now: interest-rate expectations and fiscal policy. On interest rates, the Bank of England held Bank Rate at 4.00% at its September meeting, with markets and forecasters split on whether there’s another cut this year or a pause until 2026. Lenders set fixed rates from swap markets (which reflect where Bank Rate may go next), and those expectations can shift with the Budget if measures are seen as inflationary or growth-negative.

On fiscal policy, Chancellor Rachel Reeves has ruled out increases to the headline trio (VAT, Income Tax basic rate, and National Insurance) but has signalled interest in raising more from wealth and property — through options such as tightening CGT and IHT or targeted levies on higher-value homes. While specifics remain unconfirmed before Budget day, reputable outlets report a focus on higher earners, investors and expensive properties rather than broad-based tax rises. Any property-focused move (for example, a “mansion tax” style levy or council tax reform) could nudge behaviour in prime and higher-value areas more than across the mass market.

Bank of England and mortgage approvals: are we in recovery?

Bank of England data show house-purchase approvals rose to around 65,900 in September 2025 — the strongest since December 2024 — with net mortgage borrowing up £5.5bn. This suggests a modest recovery in activity, aided by lower fixed-rate pricing earlier in the year as swaps drifted down. But approvals remain below pre-pandemic norms and are sensitive to rate expectations and confidence. Halifax’s index shows prices broadly flat on the month and up about 1.3% year-on-year, consistent with a market that’s stabilising rather than surging.

How Reeves’ potential tax moves could interact with mortgages

• If property or wealth taxes rise: Measures focused on high-value homes (or reform of council tax/stamp duty) would likely have the most impact in London and the South East. That could cool demand at higher price points while leaving mainstream segments largely driven by rates and income growth. If markets read the Budget as disinflationary (tightening), swaps could edge lower — a mild positive for fixed mortgage pricing. If measures are judged inflationary or growth-negative, swaps could move either way (higher on inflation concern or lower on growth concern).

• Investor/landlord changes: Any CGT or IHT tightening, or ideas such as NI on rental income, would affect buy-to-let behaviours more than owner-occupiers, potentially reducing investor demand or prompting portfolio reshaping. Pricing for BTL is already more sensitive to lender stress tests and rental coverage; policy tweaks could add friction.

• Behaviour and timing: Budget uncertainty often encourages “lock-in” behaviour — buyers and remortgagers bringing forward applications to secure existing deals. Approval data into October/November will show whether that occurred this year.

What this could mean for first-time buyers and remortgagers

For first-time buyers, the bigger swing factor remains fixed-rate pricing, not tax. If the Budget is broadly fiscally tight, that may support lower swaps over time, helping fixed rates. For homeowners coming off deals in late 2025–early 2026, small rate moves still matter more to monthly payments than speculative tax headlines — but a property-focused measure could influence chains in higher-value areas. If you’re navigating choices or deadlines, speak to a qualified mortgage adviser at Mortgage One via first-time buyer mortgages, remortgage guidance, or our mortgage services pages.

Key numbers:

• Bank Rate: 4.00% (last change 7 Aug 2025)

• Next MPC decision date: 6 Nov 2025

• Purchase approvals: ~65,900 in Sept 2025

• House prices: Halifax average ~£298,184, annual +1.3% in Sept 2025

As at 1 November 2025, London.

The information provided in this article is for general guidance only and does not constitute personal or regulated financial advice. For tailored advice specific to your circumstances, please contact Mortgage One directly.

Some Buy to Let mortgages are not regulated by the Financial Conduct Authority.

FAQs

1) Will the Autumn Budget push mortgage rates up or down?
Markets will react to whether measures look inflationary (potentially pushing swaps up) or fiscally tight (potentially easing swaps). Lenders price fixed deals off swaps, not the Budget itself. Watch post-Budget swap moves and lender repricing.

2) Are property taxes definitely rising?
No confirmed details before 26 November. Reporting points to options aimed at wealth and higher-value property; the Chancellor has avoided promises on broad tax cuts. Final measures will be known on the day.

3) Is the mortgage market really recovering?
Approvals have risen to their highest since December 2024 and prices are broadly stable, indicating a gentle recovery rather than a boom. Affordability and rates remain the key constraints.

4) Should I rush to remortgage before the Budget?
If your deal ends soon, certainty can be valuable. Securing a new rate now may protect you from adverse moves, and many lenders offer switch-and-improve if pricing falls before completion. Consider your timeline and speak to a qualified adviser.

5) What is SONIA and why does it matter for fixed rates?
SONIA is the overnight interest rate banks pay to borrow sterling; expected future SONIA flows into swap rates, which lenders use to price fixed mortgages.