We are delighted the general election is over and the financial and housing markets can return to a degree of certainty.
The election saw different parties competing with visions for the future of Britain on housing and mortgage policies.
It was the Conservatives who won a surprise majority and their manifesto and senior politicians who will set the pace on financial planning of the next five years.
So what does it mean? Firstly, it saw the pound strengthen significantly after the election. That is great news for any expat who owns property in the UK as the value of that home is worth more.
If you are being paid in Dollars or Euros then your rental income from UK property just became a lot more valuable.
But that is perhaps a temporary market reaction to more certainty from a majority Government instead of the uncertainty of coalition haggling that was expected.
Secondly, the Conservative are committed to a faster deficit reduction plan than the other parties with debts falling at a sooner date.
That plan affects the cost of UK Government debt – gilts. The price of fixed rate mortgages is intrinsically tied to gilt rates so the lower their yield the cheaper fixed rate mortgages will be.
In simple terms: A conservative victory should keep fixed rate mortgages cheaper for longer. We have seen rates hit incredible lows and they could fall even further.
Thirdly, a Tory Government like its predecessor coalition is committed to so-called fiscal tightening and monetary loosening. In real terms that means cutting spending while keeping interest rates low to provide a boost to the economy.
The idea is that anyone borrowing, especially mortgages, will pay less interest and have more money to spend. This stimulus should provide cover for cutting wider public spending to get the deficit down.
Even though the Bank of England sets interest rates independently the Government sets the tone and can change the rules (as it did in the last parliament) and George Osborne’s re-appointment as Chancellor is likely to see rates stay low for longer.
Fourthly, it means fewer property taxes. The Labour party had plans for a 1 per cent annual charge on properties worth more than £2m a year. That is now dead.
The Conservative poured scorn on the plans but it is worth noting their own record on property taxes is ro raise them. IN the last five years the Government has charged more and more stamp duty properties worth more than £2m. Last year it raised stamp duty to 12 per cent above the £2m threshold.
It also increased capital gains tax by 10% in 2010 from 18% to 28% hitting anyone with second homes and introduced it for foreign London buyers.
Finally, the Government has committee to raising the number of first-time buyers and building 200,000 homes a year by 2020.
It will be interesting to see if it has anymore schemes such as Help to Buy up its sleeve to boost home ownership. We wait with baited breath.
There are other ways the election has altered mortgage markets but for our we believe these five are a good indicator of how it affects your financial planning.
