Labour is promising more new homes but what will the change of government mean for house prices?
You may be wondering how the change of government will affect the property market and what Labour plans to do to resolve the housing shortage.
The financial markets have responded to the change of government in a fairly neutral way. Swap rates, which influence whether mortgage interest rates go up or down, have dipped slightly (a good thing), but they have recently been fluctuating slightly anyway.
No real impact on swap rates
The markets were expecting a Labour government, so the change has had no real impact on swap rates. (In case you’re wondering, swap rates refer to the amount that lenders pay to financial institutions to secure funding.)
While we can’t make any cast-iron predictions on the future, here is what Labour has said it will do so far…
• Build 1.5 million new homes in an effort to address the housing shortage.
• Restore mandatory housing targets across local authorities so that this goal can be achieved.
• To create new towns with supporting infrastructures such as GP surgeries and schools.
• Build more affordable housing.
• Take ‘a more strategic approach’ to greenbelt land use (regularly used for development) to ensure more homes are built in the right places.
• Confirmed it will lower the stamp duty exemption threshold for first-time buyers from £425,000 to £300,000. The threshold was raised in September 2022 from £300,000 to £425,000 to help first-time buyers but was due to be reversed back to £300,000 in April 2025. A lower threshold would mean that more first-time buyers would have to pay stamp duty.
• Keep the Mortgage Guarantee Scheme. The scheme was launched in April 2021 to give first-time buyers with smaller deposits of around 5% a chance to get onto the property ladder. Mortgage lenders can purchase a guarantee of up to 95% of net losses in the event of repossession. The scheme was previously due to end in June 2025.
Resilient market
As for the impact the new government may have on the property market, so far the market has shown resilience.
House prices remained stable in June, dipping slightly by 0.2% compared to May but showing annual growth of 1.6%. Halifax predicts house prices will rise slightly in the latter part of this year and continue to increase in 2025.
The Bank of England is under pressure to reduce the base rate this year. The next review is due on 1 August, but predictions are being made that the rate will not come down until September.
We will keep you updated on any significant news.