We think it’s really important that housing is a priority focus for whichever party wins the election on 4 July.
We don’t know exactly which changes could come in and when, so in the meantime, our experts have answered the questions you recently asked us about the housing market.
First-time buyers
Why is it so hard to get on the property ladder?
It’s hard to take that first step on the ladder, especially when you’re paying rent at the same time as saving for a deposit, and house prices have gone up over 20% in 5 years. Over the past few years we’ve seen people making their search area bigger to try and afford somewhere that still matches what they need, but it’s definitely a huge milestone to get your first home.
What’s being done to help first-time buyers?
It probably won’t come as any surprise that the change renters would most like to see from the next government is more help with getting onto the property ladder. Schemes such as Help to Buy have now finished in England and Scotland, but is still available in Wales.
Our mortgage expert Matt Smith suggests a review of mortgage affordability criteria could help: “There’s an opportunity to unlock greater affordability in a responsible way, which could help more first-time buyers get on the ladder. First-time buyers are already taking out longer mortgage terms and lender innovation has included the introduction of longer-term fixed rates that are likely to be part of the solution as they help by ensuring certainty of payments.
“Various mortgage schemes have played their part and supported a number of people, and we know from our study that people would like to see new schemes introduced, but we think longer-term solutions would be more effective than short-term schemes. Either way, it’s most likely that regulatory change is needed, so it’s critical that the government works with regulators and lenders from day one on any mortgage solutions, to ensure buy-in and take up, which will in turn create more options for first-time buyers.”
At the moment, first-time buyers in England and Northern Ireland don’t pay any stamp duty on homes costing up to £425,000. But if the stamp duty relief isn’t extended, this will revert back to £300,000 from the end of March 2025.
Making these stamp duty changes permanent was one of four changes we think could be put in place to help home-movers.
House prices
Will house prices go up after the election?
We don’t have a crystal ball, but we do have lots of data to help us see what might happen. Right now, we think house prices will remain broadly flat this year, dropping by about 1%. If a big change in policy came in that led to much more activity, then we might see prices go up, but the market right now is stable with more people finding a home to buy than at this time last year.
Why hasn’t the predicted house price crash happened this year?
You may have seen some people predicting a crash, but it’s not something we could see any signs of in our data – in fact, we think house prices will drop by around 1% this year. There are of course still challenges to moving, but there’s been more activity over the past few months than this time last year.
Housing market activity
Would it be best to wait until after the election results before buying a property?
We asked people that, and 95% of people said they were getting on with it. If you’re actively looking and you find somewhere you love, then it’s worth knowing that it could take around seven months between getting your offer accepted and picking up the keys. It’s also a huge decision you’re making, which is why we think most people are getting on with it, especially as we don’t know what could come in with the next government.
Plus, if previous general elections are anything to go by, we often see a bounce in activity in the period after the vote. Buyer demand increased in the months immediately after the 2015 and 2019 elections.
Our property expert, Tim Bannister, says: “Previous elections would indicate we may be set for a particularly strong summer once the election is over, especially if interest rates start to fall. However, every election is different, and it would depend on whether any significant housing policies are also introduced, so we’ll need to wait and see what happens to have a better view of activity for the rest of the year.”
What can be done to make the home-buying process easier, and speed it up?
Our study found that simplifying the buying process is placed second in the list of changes people would most like to see.
At the moment, the time it takes from a home first being put on the market for sale, through to handing over the keys, is averaging more than seven months, and this isn’t showing any signs of improving. We think that the next government, working closely with the property industry, should prioritise speeding up the home-moving process to encourage a less stressful and more seamless process for home-movers.
We also want to see longer-term solutions to help more home-movers across the UK, rather than short-term schemes that only help people at a certain time.
Will anything be done to stop buyers being gazumped?
Gazumping occurs when a seller accepts an offer from a buyer, but then another buyer comes into the picture and makes a higher offer – which is then accepted by the seller.
As frustrating as it can be, gazumping is legal in England and Wales.
Take a look at some of our tips to help avoid being gazumped, as well as things you can do if it happens to you.
Stamp duty
Will the next government reduce stamp duty?
Since 2022, first-time buyers in England and Northern Ireland have been exempt from paying stamp duty on properties priced up to £425,000. However, this relief is due to end on 31 March 2025. You can check the current stamp duty thresholds here, or if you’re moving and know your budget, take a look at how much you might pay using our stamp duty calculator.
Stamp duty costs – especially in higher-priced locations – could be preventing thousands of people from moving. We asked more than 14,000 potential home-movers what changes they would most like to see from the next government and the top priority was reform of the stamp duty system.
Tim adds: “At the very least, the next government should make the current changes to first-time buyer stamp duty charges in England and Northern Ireland permanent. But there’s also a bigger opportunity to reform stamp duty to encourage more movement up and down the property ladder. With such regional differences in property prices, increasing stamp duty thresholds in line with these regional differences would seem a logical first step for stamp duty reform.”
Mortgages
Why have mortgage rates risen in recent years?
Mortgage rates are influenced by a broad range of factors, but key among them is the Bank of England Base Rate and where the financial markets think it will go over the next few years. The market forecast is really important, as this forms the underlying costs that lenders pay to offer fixed-rate mortgages, which is known as ‘Swap Rates’.
When inflation rises, the Bank of England has to react as the government has set the Bank a target to keep it at 2%. One of the main tools the Bank uses to control inflation is to change the Base Rate. Inflation peaked at 11% in the UK, so the Bank of England started to increase the Base Rate from 0.1% in December 2021, gradually raising it up to 5.25% by August 2023.
As the market forecasted that the Base Rate would rise in the face of rising inflation, which was created on the back of the Coronavirus pandemic and unexpected global events, such as the war in Ukraine, mortgage rates increased.
The Mini-Budget in the Autumn of 2022 accelerated things, as markets forecast that unfunded tax cuts would result in inflation peaking at a higher rate than previously anticipated. Over the last 2 years, there has been a roller-coaster of events that has seen mortgage rates reduce when there is positive economic news, and then increase again when things don’t work out as the markets forecasted.
We’re now in a position where the financial markets are predicting that the Bank of England Base Rate has peaked, and mortgage rates have stabilised over the last few weeks. The market predicts that the Base Rate will start to fall in the next few months, and we should then see mortgage rates start to fall back.
The fall in mortgage rates is likely to be gradual, and we don’t expect to see prices return to the ultra-low prices that we had back in 2021.
Our mortgage expert Matt Smith says: “Right now, the financial markets are predicting that the Base Rate is at its peak. It’s thought interest rates will start to come down in the second half of this year, and then we could expect fixed-rate mortgage products to start to follow the same path with average rates reducing as we head into the Autumn beyond.”
Why can’t my payments stay the same when I remortgage?
If you’re on a fixed-rate mortgage, it means your payments will stay the same for the duration of the deal, with the most popular being either 2 or 5 years. This gives you peace of mind, as it protects against fluctuating payments and means that if interest rates go up, you won’t be impacted.
Of course, when your deal ends, rates and your circumstances can change significantly, and you will have to choose from the rates available at that time.
If you took out your current mortgage 5 years ago, rates are likely to be a lot higher now. This is primarily due to Base Rate rising from 0.1% in 2021 to 5.25% by August 2023, as a way of combating inflation that shot up and eventually peaked at 11%.
Finding a new mortgage rate that’s right for you, and taking action early is important, because when your fixed rate ends, you will automatically move on to the lender’s Standard Variable Rate (SVR). This is set by the lender and will usually be quite a lot higher than the fixed rate you had been paying – and will also be higher than a new fixed rate from either your current lender, or the rate you would get by remortgaging with another lender.
The mortgage market has also seen recent innovation. New lenders are offering longer-term, fixed-rate mortgages that could lock in your payment for the whole of your mortgage term (up to 40 years). A mortgage broker will be able to help you understand the options that are available to you, and help you navigate all of the different choices you have.
If you’ll struggle to afford your new payment, almost all lenders in the UK signed up to the Mortgage Charter in 2023. This allows you to take actions that can help manage higher payments. If you’re in financial difficulty and will struggle to maintain your mortgage payment, you should always speak to your lender first, as they will be best placed to help you.
Read more: How much can I borrow with a mortgage
What could be done to help first-time buyers?
Elevated mortgage rates in recent years have made it challenging for people trying to juggle paying rent, saving for a deposit, and earning enough to be accepted for a mortgage. This is especially true for people trying to buy on their own.
Our mortgage expert Matt Smith suggests a review of mortgage affordability criteria could help: “There’s an opportunity to unlock greater affordability in a responsible way, which could help more first-time buyers get on the ladder. First-time buyers are already taking out longer mortgage terms and lender innovation has included the introduction of longer-term fixed rates that are likely to be part of the solution as they help by ensuring certainty of payments.
“Various mortgage schemes have played their part and supported a number of people, and we know from our recent survey that people would like to see new schemes introduced, but we think longer-term solutions would be more effective than short-term schemes. Either way, it’s most likely that regulatory change is needed, so it’s critical that the government works with regulators and lenders from day one on any mortgage solutions, to ensure buy-in and take up, which will in turn create more options for first-time buyers.”
What will happen to mortgage and interest rates, and will they be impacted by which party wins the election?
The Bank of England’s Base Rate – or interest rate – isn’t decided by the government. While the Bank is owned by the UK government, it has had independence for setting monetary policy since May 1997. The Bank’s Monetary Policy Committee is responsible for the UK’s financial stability, setting the Bank Rate, and for the regulation of banks and insurance companies.
Our mortgage expert Matt Smith says: “It’s difficult to predict when we could start to see sizeable drops in mortgage rates, mostly because their movement is dependent on what happens with the Base Rate, inflation, swap rates, and if there are any unexpected shocks to the economy.
“The big picture remains the same – the Base Rate is unlikely to rise further, and if it does come down in the second half of this year, as expected, then mortgage rates could have some room to come down, before settling.”
The fall in mortgage rates is likely to be gradual, and we won’t see prices return to the ultra-low rates that we had in 2021.
You can check the current average UK mortgage rates here.
Making homes greener
Will the next government keep the heat pump grant in place?
It’s hoped that tackling climate change will be high on the agenda for some of the political parties.
At the moment, households can access grants of up to £7,500 towards the cost of replacing a gas boiler with a heat pump. Right now, it looks like the existing Boiler Upgrade Scheme could stay, as a way to help people switch to a cleaner, greener heating system.
But by December 2023, the number of heat pumps installed was less than half the projected number, and the scheme has achieved lower-than-expected uptake. Incentives to help people make green improvements to their homes was the third most-requested change from home-owners in our recent survey, and we think that households need better and easier access to schemes that help them go greener at home.
The header image for this page was provided courtesy of Inigo, London.
