Property118 | General Election impact on mortgage rates and house prices

With the upcoming General Election, questions from landlords and homeowners loom over its potential impact on mortgage rates and property prices.

Now an analysis from Zoopla and Mojo Mortgages aims to shed light on the potential answers.

While the government does not directly dictate mortgage rates, these are influenced by various factors, including the Bank of England’s base rate.

Despite the Bank’s operational independence since 1997, political events like elections introduce economic volatility that could indirectly affect interest rates.

Swap rate for two-year fixed deals

After the election was called last month, the average swap rate for two-year fixed deals saw a minor fluctuation.

They initially rose from 4.5% to 4.7%, before settling at 4.6%.

Meanwhile, mortgage rates have been steady with the average fixed rate across major lenders holding at 5% since mid-May, recently inching up to 5.1%.

Notably, HSBC and Leeds Building Society adjusted rates on certain mortgage products.

Average fixed mortgage rate

Despite the base rate remaining at 5.25% since August, the average fixed mortgage rate from five prominent UK lenders at each base rate announcement has fluctuated.

John Fraser-Tucker, the head of mortgages at Mojo, said: “For those whose mortgage is going to end very soon, the average standard variable rate is still above 8% while the average fixed rate is currently 5.1%.

“So, waiting for rates to fall before you remortgage could be an expensive strategy.”

He adds: “If you are likely to need a new mortgage in the next six months, whether for a new property or your existing one, it’s worth speaking to an experienced mortgage broker.”

Election’s effect on house prices

The General Election’s effect on house prices also attracts attention since elections can prompt market hesitancy, causing buyers and sellers to postpone transactions.

Zoopla’s house price index for May points showing negligible year-on-year variations.

Flats saw the biggest annual price decline, while terraced and semi-detached homes saw modest increases.

Regional trends vary, with southern England witnessing slight price drops and the rest of the UK showing modest growth.

Zoopla’s executive director, Richard Donnell, said: “The election announcement is likely to stall the pace of new home sales in the coming weeks as we approach the summer slowdown.

“However, we don’t anticipate as significant an impact as previous elections, given the lack of major policy differences between the main parties on housing.”

Mortgage rates could dampen affordability

Predicting post-election house prices is challenging since rising mortgage rates could dampen affordability – and hit property prices.

Conversely, a rate fall later this year might bolster house prices as buyer confidence strengthens.

The General Election’s true impact on the UK’s housing market remains to be seen, but landlords and homeowners will be closely monitoring the unfolding economic landscape.

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