The UK government presented its 2025 Autumn Budget (the Budget) to Parliament on 26 November 2025 with a clear intention to plug a large hole in public finances. The Budget relies heavily on the addition of personal and property-related taxes. Some of these measures will have a material long-term impact on the UK housing and mortgage market.

Key Highlights:

• Personal tax threshold freezes were extended for another three years beginning in 2028-29. This extends the fiscal drag on incomes — more payers pushed into higher tax bands as wages rise, reducing after-tax affordability for mortgage borrowers.

• A new, recurring annual council tax charge called the high value council tax surcharge applies to properties worth more than GBP 2.0 million from April 2028. This could lead to market distortion, regional disparity, reduced property transactions, and uncertainty in the market. As a result, we would expect a 5% to 10% correction in the prices of high-value properties and some impact on properties below the thresholds.

• The Budget increases the rates of income tax from property income by two percentage points starting in April 2027. The new move would mean an additional annual tax burden for landlords who are already feeling squeezed.

Looking ahead, the outlook remains challenging. With the Office for Budget Responsibility forecasting average mortgage rates to climb from 3.7% to 5.0% over the next five years, affordability will continue to erode–particularly when combined with stagnant real incomes and tightening monetary conditions. The buy-to-let sector faces a “perfect storm”, and the inevitable result will be a contraction in rental supply and a subsequent spike in rental prices.

Source: Morningstar DBRS Autumn Budget Fallout: Impact on UK Housing and Mortgage Market