Autumn Budget 2025: What it means for mortgages & the property market

The Chancellor’s Autumn Budget has now been delivered, and while much of the focus was on economic growth and public finances, several major announcements will directly affect homeowners, buyers, landlords and investors. Below is a clear summary of the key policy changes — and what they could mean for you if you're planning to buy, sell, rent or invest in property over the coming years.

A New “Mansion Tax” for High-Value Homes

One of the headline announcements was a new annual council tax surcharge applying to homes valued over £2 million. Often referred to as a “mansion tax”, this will introduce a tiered, ongoing annual charge starting from £2,500 per year, rising to £7,500 for properties valued above £5 million.

This new tax is scheduled to come into effect from 2028, giving homeowners time to prepare.

What this means for you:
The change affects less than 1% of UK homes, but it will reshape the very top end of the market. Those buying or owning high-value properties will face higher ongoing costs, which may soften demand for luxury homes. For the wider market, however, this policy won’t increase costs for most homeowners.

Higher Taxes on Rental Income

From April 2027, rental income will be taxed under a separate, higher system. Rates will rise to:

• 22% (basic rate)
• 42% (higher rate)
• 47% (additional rate)

This represents an increase of 2 percentage points across all bands.

Impact on landlords:
Landlords will face increased tax liabilities, at a time when many already feel squeezed by rising costs, compliance obligations and tighter financing rules. Some may consider restructuring their portfolio or exiting the market, which could reduce rental supply and place upward pressure on rents.

Mortgage Rates and Housing Market Outlook

The Office for Budget Responsibility (OBR) expects mortgage rates to be higher for longer, projecting that average rates could rise from 3.7% in 2024 to around 5% by 2029. This is driven by persistent inflationary pressures and higher expectations for long-term interest rates.

The OBR also expects house-price growth to slow, partly due to higher borrowing costs and tax changes affecting investor sentiment. However, no reductions in Stamp Duty Land Tax (SDLT) were announced, and there were no new taxes for homes below £2 million — meaning mainstream homebuyers face no additional upfront purchase costs.

What it means for Buyers, Sellers and the Market

First-Time Buyers & Home Movers
For most buyers, the Budget brought stability rather than major change. No new taxes on standard property purchases means the biggest influence remains mortgage affordability.

Higher expected interest rates may mean buyers need to be realistic with budgets, but with house-price growth forecast to remain subdued, there may be opportunities for those in strong financial positions.

Sellers
Market activity may cool slightly as buyers adjust to ongoing higher mortgage costs. Expect stronger demand in the lower and mid-value segments, while the luxury market may feel the greatest impact from the new mansion tax.

Landlords & Investors
The rental sector is likely to experience the most pressure. The increased tax burden on rental income will reduce net yields, and some investors may reconsider future purchases. However, reduced supply may push rents higher, potentially balancing part of the impact.

Renters
Unfortunately, renters could feel the knock-on effects if landlord costs continue to rise. With many landlords already exiting the market, the structural shortage of rental homes may worsen, increasing competition and putting upward pressure on rents.

Conclusion

While the Budget did not overhaul the housing market, it introduced several targeted measures that will shape behaviour at both the high-value and investment ends of the market. For most homebuyers, the picture remains steady, with no changes to Stamp Duty and no new taxes below the £2 million threshold. However, higher expected mortgage rates and tax increases for landlords will influence affordability and availability in both the buying and rental markets.

If you’re considering buying, selling or refinancing, professional mortgage advice can help you understand how these changes may affect your options in the months and years ahead.

Any information contained in this article is for general information only and does not constitute financial advice. It is essential that you seek independent advice from a qualified regulated mortgage adviser.