All eyes are set on the new PM of the UK, Rishi Sunak. The UK property market has been an absolute roller coaster ride since the beginning of the Covid-19 pandemic. From a stagnant lull in the housing market to a month-on-month rise in average property prices, investors and potential buyers are unsure about what to expect from the UK property market in 2023. Even if you ask the number one estate agents in Watford about the future of the UK property market, their answer is uncertain. But, this is what the experts have to say about Rishi Sunak and his potential impact on the UK property market.
Currently, the Prime Minister of the UK is faced with three major challenges. One, will he essentially be able to turn back the clock to restore and rebuild the buyer’s confidence in the UK housing market? Two, what will be the national impact of the mini-budget reversal on the economy as well as on the property market? And three, how will the rising rate of inflation coupled with the rising mortgage rates impact the property market in 2023?
The uncertainty in the UK in the last few months has definitely had a severe impact on the rate at which the UK government can borrow. Due to this, the rate at which the citizens of the country can borrow has also been impacted. This means, mortgage rates for builders, developers, potential buyers, property buyers, first-time buyers as well as refinancing mortgage costs have all been impacted. The one way for the new PM to bring back confidence in the UK housing market is by reducing the cost of borrowing. As Rishi Sunak stated recently, one of the first things on his list is to bring down the rate of inflation. Experts believe that the cost of borrowing will certainly decrease as soon as the rate of inflation reduces. Thus, mortgages will become more affordable and more buyers will be able to enter the property market again. Once mortgage rates start to fall, banks and lenders will certainly feel more comfortable putting out more mortgage options on the market which will in turn term first-time buyers as well as low-income buyers who currently cannot afford to climb on to the UK property ladder.
Let’s not forget, the current PM served as the Chancellor of the Exchequer from 2020 to 2022. When the Covid-19 pandemic hit, he introduced the stamp duty holiday which in turn helped build the buyer’s confidence and boost the economy as a whole. When the Covid-19 pandemic hit, real estate transactions were at a complete halt which led to buyer uncertainty. It is the very introduction of the stamp duty holiday that led to an increase in the demand for housing in the UK in 2021 and 2022. In fact, the stamp duty holiday was extended because of its amazing success and it is this very scheme that led to the month-on-month increase in average property prices in the UK, until very recently.
At the moment, Rishi Sunak has his work cut out for him to reverse the damage that the mini-Budget imposed on the UK housing market as well as the UK economy as a whole. The challenge ahead of him regarding the UK housing market is huge, but the good news is that the mortgage rates fell for the first time since he swore his oath after September 2022. While the current mortgage rate for a two-year fixed term is still high, reaching a whopping 6.55 per cent, it is expected that the Prime Minister’s background in finance could help him rectify the situation further.
It is safe to say that the citizens of the UK definitely have their hopes pinned on their new Prime Minister. They are looking at him to reduce the rate of inflation, thus reducing the cost of living, the rates of interest and hence making mortgages more affordable. By reducing the rate of inflation in the UK, the current PM will be able to boost the economy as a whole while allowing the UK housing market to course-correct. As the country gets more politically stable, it is expected that the government will focus on the pricing of fixed-rate mortgages which are expected to decrease. However, if the Bank of England further increases the base ratio to combat the ongoing inflation, then that could mean trouble for variable mortgage rates as well as for those who are looking to take out a new mortgage. As long as the new government attempts to prioritise the rising inflation along with the new housing policies, we should see a clearer picture regarding the UK housing market very soon.