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The General Election Effect, Inflation and Mortgage Rates


Monty from Coreco here, ready to give you the lowdown on what’s been shaking up the mortgage market this past month.

Two things have been dominating the market the past few weeks; we’ve got a surprise General Election on the horizon and, of course, the ever-present shadow of inflation and its effect on interest rates. Let’s dive in!

Inflation and Interest Rates: The Ongoing Saga

The latest news on inflation is a mixed bag. The Consumer Prices Index (CPI) rose by 2.3% in the 12 months to April 2024, down from 3.2% in March. While a drop is always welcome, this was a bit higher than what economists had predicted. It seems like the UK’s still got some sticky service side inflation hanging around, earning us the title of “Inflation Nation.”

So, what does this mean for interest rates? The Bank of England’s been playing it cautious and looks like it will continue to do so until they see more conclusive data that inflation has been finally tamed.

In fact, we have recently seen SWAP rates nudging up slightly, reflecting expectations that the first interest rate cut won’t now come until the end of summer, with only one cut likely this year.

In plain English, mortgage rates aren’t dropping significantly anytime soon. We’re likely to see 5-year fixed rates hovering around the low 4% mark until we get a substantial change of data.

Whilst this may put a dent in lenders’ plans to reduce mortgage rates substantially in the short term, it’s not all bad news. Despite these bumps, there’s a healthy buzz of competition among lenders. They’re keen to lend and grab market share, especially during the traditionally strong spring season. So, we are keeping our eyes peeled for you to identify the very best deals out there as soon as they appear.

Election Effect: To Buy or Not to Buy?

Surprise, surprise! We’re heading to the polls on July 4th for a General Election. This caught everyone off guard, including the PM’s own cabinet. Naturally, this raises the big question: Should you crack on with your property plans now, or wait and see what the new government might do?

My view on this has always been clear that trying to predict what a new government will do is a bit like trying to predict the British weather. A new government could swing the market in any direction, and whether it is trying to predict the market or foresee what a new Government may or may not do is fraught with danger.

I suspect that whichever party forms the next Government there will not be too much of a difference, certainly not immediately.

However, typically, new governments kick off with harsher policies, knowing they have years to smooth things over before the next election. This is especially true when there is a change in the party when they can blame everything on the last lot, and even more so at times like now when they need some money to play with.

Those that adopt a wait-and-see approach could end up paying more in stamp duty as an example, or if stamp duty is cut or another policy is introduced that leads to a release of years of pent-up demand, end up paying higher property prices, especially in highly sought-after areas.

I would always advise someone to buy when it is right for them, they find the right property and it is affordable to do so. A home is a long-term commitment, not a short-term investment, a place to live in and create memories. Why risk losing out on the home of your dreams to ‘see what happens’?

House Prices

We will discuss the effect on house prices in future election-related blogs, but for now, the latest Nationwide House Price Index this week showed that annual house price growth increased to 1.3% in May, up from 0.6% in April.

Robert Gardner, Nationwide’s chief economist, said: “The market appears to be showing signs of resilience in the face of ongoing affordability pressures following the rise in longer-term interest rates in recent months. Consumer confidence has improved noticeably over the last few months, supported by solid wage gains and lower inflation.”

He also pointed to the fact that usually, General Elections do not actually have much impact on house prices, stating “It appears that housing market trends have not traditionally been impacted around the time of general elections. On the whole, prevailing trends have been maintained just before, during and after UK general elections. Broader economic trends appear to dominate any immediate election-related impacts.”

I still believe this year will prove to be a good year to buy, especially as mortgage rates have eased and house prices have softened. There is so much pent-up demand in the market and a lack of housing supply so it is very hard to see prices reducing any further.

Waiting for a new Government could cost you just as much as it could save and only with the benefit of hindsight will you know whether you have been better or worse off.

From what we have seen so far, more of our clients are keener to get things moving before rather than waiting to see what happens after.

Best Mortgage Rates

In terms of mortgage rates, for standard residential mortgages, borrowers can obtain 2-year fixes at 4.74% (7.60% APRC) and 5-year fixes from 4.34%, (6.40% APRC), whilst variable discounted rates are around from 4.89%, (6.70% APRC) and variable tracker rates from 5.35% (7.60%).

Those looking at Buy-To-Let can now obtain products from 3.79% (8.10% APRC) for a 2-year fixed, 5.52%, (7.60% APRC) for a 2-year tracker or 5-year fixes are available from 4.00% (4.40% APRC).

To speak to one of our friendly, professional mortgage advisers please click here or call us on 020 7220 5110.


Photo by Marcin Nowak on Unsplash

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Andrew Montlake

Written by Andrew Montlake

Andrew Montlake, better known as Monty, began his journey with an Hons degree in Economics & Politics before starting in the mortgage industry in February 1994. As a main founder of Coreco in 2009, he successfully grew the brand, marketing, and communications, and was made MD in 2019 focussing on the overall vision, strategy, and culture of the company. As Coreco’s media spokesperson, Andrew can often be seen or heard on TV and radio as well as regularly commenting in the national, local, and trade press. He is the author of this acclaimed Mortgage Blog and is well-known for his social media, podcasts, and public speaking. Andrew is now proud to serve as Chairman of the Association of Mortgage Intermediaries, (AMI) as a cheerleader for the Mortgage Industry as a whole and continues to work at the coal face, writing mortgage business and advising clients.

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