With Theresa May’s snap election announcement last month, we entered once again into a period of grand manifesto pledges, political machinations and fierce debate. But what might this mean for UK housing policy, and what are the implications for property investors?
Labour’s Jeremy Corbyn has pledged to build a million new homes over five years if he makes it to 10 Downing Street after the general election, in June.1 However, Sir Patrick McLoughlin, Conservative Party Chairman, accused Corbyn of making promises that could had not been costed realistically.
Demand for high quality housing
Demand for high quality housing in the rented sector is still far outstripping the supply: with the housing target of 240,000 new homes that the UK needs every year, being missed by 100,000.2 Home ownership is now at its lowest since 1985, at 62.9%, with one in five households in England living in private rented accommodation3. It is no surprise then, that the shortage of housing, and the pressure this is putting on borrowers, will be a key election issue. However, with party manifestos due to be officially published at some point next week, we are yet to see the full picture.
Looking to the private sector
Whereas in the past, the government took on the responsibility of building housing, it now seems that the current government looks to the private sector to fill the gap in the housing supply. By bringing in private investment to build new homes the government hopes to earn returns through dividends.4 Despite this, Labour has pointed their finger firmly at the Conservatives, accusing them of “seven years of housing failiure”5.
Brexit brings uncertainty to the mortgage market
Despite Brexit and the uncertainty it has brought with it, there are still some major factors which have buoyed up mortgage market. Namely, the disparity between supply and demand, modest rises in inflation and the low Bank of England Base Rate.6 It is widely anticipated that the Bank of England will continue to maintain the base rate at 0.25%, in order to underpin economic growth.7 It would seem that despite some anxieties about inflation increasing too sharply, the Monetary Policy Committee is to a certain extent holding its breath and will not make any sudden changes. This comes not only as a result of Brexit, but also because of upcoming board member changes.8
Positive outlook for those looking to remortgage
With interest rates low, and ever more innovative mortgage products available from private banks, the outlook for those looking to remortgage is more positive than it may seem. Moreover, let’s not forget that lending above a million is still much cheaper than it has been in a long time.
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