Election result already priced-in to housing market, says top analyst

The result of the election isn’t likely to be a gamechanger for the housing market, a prominent business consultancy says. 

An analysis by Hargreaves Lansdown says that both the main parties are pledging to help people onto the property ladder – although in different ways. 

Both are promising to build more houses. Labour is focusing on building more affordable housing, prioritising first-time buyers, and reforming planning to speed things up. Both parties have pledged a permanent mortgage guarantee scheme, but the Conservatives have gone further. They’ve suggested cutting stamp duty on homes costing up to £425,000 for first-time buyers, introducing a new Help-to-Buy equity loan scheme – offering up to 20% towards the cost of a new-build, and a temporary two-year capital gains tax holiday for landlords who sell to tenants.

Neither of the main parties mentioned the Lifetime ISA in their manifestos. However, the consultancy says this still offers a vital leg-up onto the property ladder. HL estimates that 11% of first-time buyers with a mortgage used a Lifetime ISA to get onto the property ladder in the most recent year we have data for (2022-23).

“It can make a huge difference, because the first £4,000 a year you put towards your deposit is boosted by a £1,000 bonus from the government. You need to be aged 18 to 39 and have at least a year between when you initially open the LISA and when you buy, but if you qualify, you could get money from the government towards your deposit. In 2023, among HL LISA clients, the average bonus was £747 during the year” explains Sarah Coles, head of personal finance at the consultancy.

However, a number of mortgage experts have gone on record saying the calling of the election has taken some steam out of the sales market, at least until after Thursday.

This was evidenced, they say, by UK house prices edging up by just 0.2% in June, according to the Nationwide. This resulted in the annual rate of growth rising from 1.3% in May to 1.5% in June, leaving prices around 3% below the all-time high recorded in the summer of 2022.

The news agency Newspage asked a selection of property and mortgage experts for their views. 

Emma Jones, Managing Director at broker Whenthebankssayno, comments: "The General Election announcement definitely triggered a drop-off in demand, at least in the first half of June. It's likely people were watching the debates rather than scrolling through Rightmove. But when a number of lenders started to lower rates towards the end of June, the market got its mojo back and demand picked up sharply. News that mortgage rates were getting cheaper put property front of mind and not politics. With an interest rate cut surely now not far off, we're expecting the second half of the year to be significantly more active than the first. The symbolism of that first rate cut will reverberate across the market and really boost sentiment."

And Bob Singh of Chess Mortgages adds: “In our experience, politics took the steam out of the purchase market in June. Since the snap General Election announcement in the latter stages of May, prospective buyers have adopted a wait-and-see approach and have deferred any moving plans until the election outcome is clear. Remortgages have still been busy, along with product switches, as people seek to lock into the lowest rates possible. With US inflation data finally looking better and UK swap rates edging down, many lenders started shaving their rates towards the end of June. This began to boost activity as did Lloyds Banking Group chief executive, Charlie Nunn, stating that rates were not expected to fall to the low levels witnessed post-Covid. This could mean more buyers stop waiting for an ultra-low base rate bus that will never come. The second half of the year should be busier once the election uncertainty evaporates and, as is looking increasingly likely, we get that crucial first rate cut in August or September."

While Andrew Montlake, managing director of broker Coreco, sees it this way: "Demand for property tailed off in June as a combination of sun, football, politics and the lack of an interest rate cut saw many potential buyers lose focus. With sellers also adopting a wait-and-see approach ahead of the General Election, June may well mark the calm before the storm. A stable government, focused housing policies and the potential for an interest rate cut at the next meeting could see a huge amount of pent-up demand unleashed. If we do get a cut when the Monetary Policy Committee next meets, the usual seasonal lull could turn into a mêlée. With a shortage of housing as it is, it won’t take much for prices to head north once more, leaving buyers yet again shopping in a sellers' market."