Reacting to the news that the Prime Minister would resign and a leadership contest for the Labour Party would be held by summer, Richard Dana, founder and CEO of mortgage and savings platform at Tembo, said political uncertainty was “rarely good news for people making major financial decisions”.
He added: “Buying a home is one of the biggest commitments most people will ever make, and confidence matters.”
Dana said that whoever formed the next government should not allow the focus on first-time buyers to slip, adding: “The challenges are well known: unaffordable housing, insufficient supply and outdated support schemes such as the Lifetime ISA. These issues are too important to be put on hold.”
He said that over the last year, mortgage affordability had improved, rates had stabilised and aspiring homeowners were more optimistic.
Dana said it was important not to lose that momentum, as “first-time buyers need certainty that support schemes and housing policies will be improved and modernised, not delayed or axed by political change.”
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“The UK’s housing challenges are bigger than any one political leader. What matters now is maintaining a clear, consistent commitment to helping the next generation build financial security and achieve homeownership,” Dana said.
Tom Bill, head of UK residential research at Knight Frank, said: “In a similar way to last year, the biggest risk for the residential market over the next few months is speculation. Further uncertainty around wealth and property taxation means buyers and sellers may hesitate while the content of the next Budget and the identity of the next Chancellor remains unclear.
“The reality is that policies like a fundamental overhaul of stamp duty is not something a government on the financial back foot with two and a half years before the next scheduled general election can manage. Bond markets have priced in a Burnham victory to some extent, but mortgage costs could be pushed higher if investors read stories that point to higher taxes and untargeted spending.”
Nathan Emerson, CEO at Propertymark, said housing must remain at the heart of the political agenda and the government must continue delivering on promises.
Emerson said: “We have seen some of the most significant changes to the rental sector in over 30 years with the implementation of the Renters’ Rights Act, alongside a commitment to build 1.5 million new homes to meet growing demand.
“Meeting future housing requirements requires clear political ambition and consistent leadership, especially as we embark on further reforms to the home buying and selling process.”
Scott Clay, a director at Together, said the UK was holding its breath over the leadership race, but any successor would still face the same economic challenges.
“Delivering wide scale housing, regeneration and investment will be vital to build a stronger national economy. It’ll also be particularly interesting to see how gilt markets respond to any political turbulence, as movements in gilt yields directly influence mortgage pricing. At a time when borrowers are hoping for greater stability and lower rates, markets will look closely for signs of fiscal discipline and policy continuity,” Clay said.
The immediate impact on the economy
Adam French, head of consumer finance at Moneyfactscompare.co.uk, said: “Money markets had already begun pricing in fresh political uncertainty after last week’s by-election results, with gilts and swap rates rising by around 10 basis points and holding at those levels.
“As a result, Sir Keir Starmer’s resignation has prompted a fairly muted response so far, with the effects already largely reflected in funding costs.”
French said political volatility tended to push up borrowing costs and the forecast for the economy would now depend on fiscal policies put forward by the future Prime Minister.
French said: “The lessons of the 2022 mini Budget remain fresh. Fiscal headroom is tight and money markets will be watching the UK closely. If plans don’t add up, the subsequent loss of confidence can quickly drive up borrowing costs. Once again, it is households [that] risk picking up the tab if market confidence is undermined.
“For those due to get a new mortgage later this year, there are steps they can take to reduce the risk of being caught out by rising rates. Many lenders allow borrowers to secure a new deal up to six months before their current mortgage ends, providing valuable protection should uncertainty push rates higher in the meantime. If rates do fall, borrowers can usually switch to a cheaper deal before completion without penalty.”
Following his recent by-election win in Makerfield, Susannah Streeter, chief investment strategist at Wealth Club, said Andy Burnham looked set to become Britain’s seventh Prime Minister in around a decade, “a remarkable level of political upheaval for a developed economy”.
She said the revolving door at Number 10 had “tarnished the UK’s reputation as a stable place to do business and made it harder to attract the long-term investment needed to drive stronger economic growth”.
Streeter added that Starmer’s resignation “has kicked off another round of speculation about the direction of policy ahead. The pound is languishing at multi-month lows, borrowing costs remain highly elevated, and the domestically focused FTSE250 has sunk further into the red.”
“While some uncertainty may be easing as Burnham’s path to Number 10 appears increasingly clear, he’s an unproven economic force and so uneasiness looks set to linger,” she said.
Burnham has since confirmed his intention to stand in the leadership contest.
Michael Field, chief equity strategist at Morningstar, said the FTSE100 was down “very marginally” and the potential election of a popular candidate like Burnham would improve the market perception of the UK.
He added: “For the most part, Burham’s suggested policies are net neutral relative to what we are dealing with today. Of course, elements like the nationalisation of utility companies would be a negative for that sector, but the likelihood of something like this being actioned is another question.”
