Labour’s campaign slogan was ‘change’ – but will their landslide election victory mean a much-needed change for homeowners, mortgage borrowers and first-time buyers?
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Freedom to Buy – the revamped version of the Mortgage Guarantee Scheme – was the stand-out pledge for first-time buyers from Keir Starmer’s Labour’s election manifesto.
It will mean better mortgage terms will be available for first-time buyers and this will make it easier for young people to enter the housing market.
Labour’s plan to provide first-time buyers with priority over international investors to buy homes is also aimed at helping more people take their first step on the property ladder.
And its promise to build 1.5 million homes over the next parliament was branded ‘bold’ and ‘ambitious’ but identified, at least, the dire need for more housing.
But what about interest rates? Will the Labour win mean a base rate cut to help struggling homeowners with high mortgage costs?
Nicholas Mendes, mortgage technical manager at John Charcol, explained, when it comes to this particular issue, much depends on how the financial markets respond to the new government.
“While Labour’s housing and economic policies aim to support lower mortgage rates and greater accessibility for first-time buyers,” he explained, “the overall impact will depend on the market’s perception and the successful implementation of their proposed policies.
“From our current position, we do not expect to see the volatility of recent years. With inflation expected to near the Bank of England’s 2% target, Labour will be in a fortunate position to be the government in power as mortgage rates continue a downward trend.”
Mendes predicts there will be two interest rate cuts before the end of 2024. “I anticipate the Bank of England will implement two rate cuts of 0.25% each,” he said, “with a possibility for a third cut, reflecting an optimistic outlook for the UK economy.
“These measures are expected to stimulate growth, enhance consumer and business confidence, and maintain inflation targets, setting the stage for a robust economic recovery and financial stability.”
How will the new government address the housing crisis?
The promise to build 1.5 million homes, reform the housing systems and take a ‘brown field first’ approach to building was set out clearly in Labour’s manifesto. But the question this morning, as Keir Starmer prepares to enter Number 10, is can the new government deliver on this promise?
Kim McGinley, director and specialist Broker at VIBE Finance, speaking via the Newspage Agency, said: “The new government will be judged on what they do next. The manifesto contained words but now we need action to solve what has been a decades-long issue.
“Only time will tell if Labour can fulfill any of their promises on the critical issue that is housing.”
Meanwhile, Michelle Lawson, director at Lawson Financial, said to Newspage: “Keir Starmer has now got a momentous uphill struggle to meet his promises in the manifesto. 1.5m houses don’t build themselves and affordability won’t be transformed overnight.
“The General Election result, if nothing else, is a huge lesson for politicians to listen to the public who vote for them.”
How will the Labour win impact house prices?
In the lead up to the general election house prices have remained steady, rising in June by 0.2% according to Nationwide, whilst Halifax today reported a fall of 0.2% in the same month.
Experts explained this lack of movement was partly down to uncertainty about the potential change of government – something which means many would-be buyers hold off from making a move – along with the high cost of borrowing.
Now the government is in place and Labour has won by a landslide, will would-be buyers gain the confidence to make their move?
Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, said: “A stable political environment can potentially deliver a confidence boost to the housing market, particularly one that has struggled over the past year with high borrowing costs and a dearth of available and affordable stock.
“Buying a first home, upsizing and even downsizing are all major personal finance decisions, which is why confidence in how your country is run is vitally important.”
Nicky Stevenson, managing director at national estate agent group Fine & Country, also thought the Labour victory will prove positive for the housing market.
She said: “Buyers and sellers should be assured by today’s results that the property market is likely to remain robust in the coming months. Further buoyancy in the housing market is expected once the political climate settles.”
She continued: “It is going to be very interesting to see how the new Labour government injects some fresh thinking into the industry, following several years of dramatic ups and downs in house prices and property transactions.”
Stevenson concluded: “Overall, there is room for cautious optimism for the rest of the year and the property and financial markets will benefit from a decisive majority for the government, as opposed to the instability that could have loomed with a hung parliament.”
