If gilt rates went up by just three-quarters of a per cent, and mortgage rates rose accordingly, higher mortgage rates would cost families an extra £624 next year on a new £118,000 mortgage – the average according to CML figures – or £52-a-month on a repayment mortgage. This is the equivalent of raising income tax by three points to 23% for someone earning the UK average wage of £25,800.
Jonathan Moore, director said: “Mortgages rates are linked to the wider financial market. If the wholesale financial market is concerned the hung parliament cannot cut the deficit, and inflation will rise, yields on gilts will rise – pushing up the cost of mortgages. A rise of three quarters of a per cent in gilt yields is a conservative estimate of the impact of the hung parliament.”
“If we don’t deal with the debt crisis we’ll have bigger mortgage bills for families. First-time buyers were given a small boost by doubling the stamp duty tax-threshold. But the benefit of this could be wiped out by the jump in mortgage rates a hung parliament will bring about, continuing the freeze in the mortgage market. Mortgages are already too expensive and restrictive, and thousands more first-timers will be kept out of the market.”
“Historically, hung parliaments have led pretty rapidly to another general election. Politicians will be thinking of short-term popular policies. Effectively a hung parliament won’t be able to take the sort of drastic action that the country needs to cut the deficit.”
In other reaction to the news of a hung parliament industry commentators were quick to respond:
Nigel Lewis, property analyst at FindaProperty.com said:
“Property markets tend to pick up after elections whatever the outcome as home buyers and sellers pick up the reins again and get moving after the hiatus around the final weeks of the campaign – and with the exception of the Tories and their desire to scrap HIPs, none of the parties have major changes to the market on their agenda so a hung parliament won’t change much.”
David Bexon, of SmartNewHomes.com, said:
“With nine housing ministers in the last 13 years, it is fair to say that government has not recognised the importance of the housebuilding industry in recent times. The sector needs leadership from politicians to stave off a housing crisis, but the uncertainty surrounding today’s result will not fill the industry with confidence.
“While the exact makeup of the government hangs in the balance, developers will continue to hope for the best-case scenario: the appointment of a decisive minister who will be committed to making progress on what is a key national issue. However, with housing largely treated as a sideshow in all three major manifestoes, many housebuilders are concerned that housing policy will prove to be a sacrificial lamb in a round of short-term political dealmaking.”
Assetz Chief Executive Stuart Law said:
“The much-touted hung parliament has not had the immediate effect on the money markets that was originally anticipated. Rather than witnessing a fall in the rate of the pound against the euro we have seen it revised upwards this morning as a result of continued turbulence on the continent. If the strength of the pound continues to grow against the euro it would signal that now is an excellent time to buy property abroad. Those people who already own property in Europe – renting it out in sterling and paying their mortgage and bills in euros – will also be able to cash-in on the euro’s weakened state. As the influx of foreign money into the UK market slows, we would expect to see the growth rate of prime London becomes more measured – possibly even falling in the short term.”
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