The property industry hopes the general election will see calls for more housebuilding and greater landlord protections form a key part of the campaign – but slower mortgage lending may be the first thing the sector sees.
Prime Minister Rishi Sunak said yesterday the country will go to the polls on 4 July.
John Charcol mortgage technical manager Nicholas Mendes says: “During the run-up to an election, uncertainty about the future political landscape typically causes financial market fluctuations.
“This instability can prompt lenders to adopt a more cautious approach, potentially delaying significant rate reductions until the economic outlook becomes clearer.
Mendes adds: “Once the election results are known, the outcome can either alleviate or exacerbate market uncertainties.
“A decisive victory and a clear mandate for the winning party often lead to increased economic confidence and stability, which, coupled with falling inflation and future bank rate reductions being priced into swaps, can positively influence financial markets and mortgage rates.”
Domus Holmes director Jerome Lartaud points out that this period of uncertainty in the industry will spread beyond lenders.
Lartaud says: “The next six weeks will be a period of cautious observation for many in the property market.
“We are likely to see a stall in activity as buyers and sellers adopt a wait-and-see approach, with many preferring to delay major financial decisions until the political landscape is clearer.
But Rightmove property expert Tim Bannister points out that a July election may play in the property market’s favour.
Bannister adds: “An election in the summer, when the market is traditionally slower, could have less impact on housing market activity than if one had been called for the Autumn.
“So, as we head towards this election, the housing market is likely to stay active, with activity ramping up once the election is over and things become clearer.
Last year, the UK built 234,400 homes, unchanged compared to the previous 12 months, according to Department for Levelling Up, Housing and Communities data in November.
This is below the 2019 Conservative manifesto target of adding 300,000 homes a year by the mid-2020s.
Labour leader Keir Starmer has promised to build 1.5 million homes over five years if the party is returned to government, through a combination of looser planning rules and green belt construction.
However, the property industry notes that housing secretary Michael Gove was forced to back down on his wide-ranging planning reforms when he faced a backbench rebellion in November 2022.
John Phillips, chief executive of Spicerhaart and Just Mortgages, wants to see how the major parties plan to pull the UK out of its housing crisis.
Phillips says: “We certainly need to see some concrete plans on how they plan to answer the clear affordability challenges that remain in the market, as well as the persistent undersupply of housing.
“An action plan is also needed to encourage landlords to remain in the market to support the millions of households that rely on the private rental sector.”
He adds: “With real pressures on affordability, it would be fantastic to see a return of schemes such as Help to Buy, or something similar, that includes second-hand homes.
“Given that it is proving to be the main way buyers are getting onto the property ladder in the current climate, it would be great to see more support given to the likes of shared ownership and other low deposit schemes.”
Once an election is won the relationship between the new administration and the Bank of England will have a profound effect on mortgage rates.
John Charcol’s Mendes says: “The Bank of England’s monetary policy is another critical factor influenced by election outcomes. The new government’s fiscal policy approach can affect the central bank’s interest rate decisions, which are a primary determinant of mortgage rates.
He adds: “A government adopting expansive fiscal policies might lead the Bank of England to raise interest rates to curb inflation, resulting in higher mortgage rates.
“Conversely, a government focused on austerity and reducing public debt might support lower interest rates, making mortgages more affordable.”
