With the 2017 snap election coming to an uncertain end we look to examine how this will affect the housing market.
The Conservatives had vowed to go ahead with Brexit, while Labour was seeking to amend negotiating terms with Brexit. On the other hand, the Liberal Democrats had not ruled out holding another Brexit referendum.
With the election, we had hoped to get a clearer understanding as to which position the nation will be taking, however, with the hung parliament created by the snap election, this has lefty greater uncertainty, which the market is sure not to like. With Brexit already rocking the boat, the housing market could do without the added hassle.
The outcome was expected to be a Tory landslide however the Tory party's win was not as immense as expected and has backfired on Theresa May with calls for her resignation. Jeremy Corbyn on the other had has come out of the election in a better position than when he entered it whether by luck or political judgment, leaving the political landscape with more ambiguity.
We know now that for the Conservatives to have a majority in parliament, they have had to create a coalition with DUP. So, before we consider the impact the results of the election have on the market, we need to consider the relationship of this new Government. A Conservative and DUP coalition would have nearly the same number of MPs as the previous Conservative Government this will provide the DUP with considerable bargaining power in parliament. The Northern Irish Party DUP have a crucial ten extra seats that the Conservatives need and will wield much influence on the primary considerations such as the European Union.
Brexit will obviously be a critical issue with the Northern Ireland party, and their stance has been in line with the Tories of pro-Brexit. However, the DUP will have some specific Brexit priorities which are relevant to Northern Ireland first and then the whole of the UK. Thus, the challenge of agreeing on a basis which is best for the entire the UK has just got a lot more difficult.
A coalition could last the full five years, as the Conservative and Liberal Democrat coalition did, but from the markets’ viewpoint, the increased likelihood of another election being called at any time just adds another layer of uncertainty.
A coalition only increases uncertainty about the Brexit negotiation and the final terms of the UK’s exit from the European Union.
The uncertainty created by the election will be unhelpful for both sterling and the economy in general, but it is harder to know what effect it will have on interest rates. Alex Gosling, CEO of HouseSimple , explains: “The last thing the housing market needed right now, with house growth slowing, was a hung parliament, and that’s exactly what it’s got.”
He added: “We are now faced with more political uncertainty, and that could feed through to buyer and seller confidence. We could see consumers holding off making a purchasing decision until the political landscape is clearer.”
However with the current 0.25% Bank Rate which is close to the floor, and gilt yields are close to all-time lows if businesses reduce investment The Bank of England might consider it necessary to provide more stimulus.
On the other hand, whether the new Government lasts a few months or a full five years, markets will factor in the increased risk future uncertainty and the increase in gilt yields which would likely follow. Which means the rates are low, which could mean a further reduction of rates or an increase. So it may be a time where people take a long time view on their Mortgage Brokers deal because of uncertain times.
What is evident is that the Bank of England will proceed cautiously by either keeping interest rates low or keeping them on the same level. All of which is good news for those who are either looking for a mortgage or who already have one.
This 2017 Snap election has lead to more uncertainty, less faith in government, which is what May was not keen to establish, and in turn, may have crippled the economy on a greater scale.
It appears as though the election has not helped ease the troubles that Brexit brought with it.
What Impact has the General Election had on the Mortgage market?
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