How Labour winning the general election will impact mortgages and housing

July 5, 2024

The 2024 UK general election has ended with a significant victory for the Labour Party. This change is expected to have a big impact on housing and mortgages in the UK. Labour’s new policies are aimed at making it easier for people to buy and rent homes, addressing the housing crisis, and supporting first-time buyers.

Labour’s housing policies and their impact

Here are some of Labour’s housing policies and how they will impact people:

Increasing affordable housing supply

Building new homes

Labour plans to build one and a half million new homes within the first five years of Labour government. Building more homes should help bring down house prices and reduce competition among buyers.

This construction boom will also create jobs and boost the economy. However, Labour will need to secure enough land and get planning permissions to build these homes, especially in areas where housing demand is high.

Affordable housing mandates

Labour wants 50% of all new homes to be affordable. This means that half of the new houses built will be within reach for people on lower incomes. By mixing affordable homes with other housing, Labour aims to create diverse and inclusive communities.

While this might reduce profits for developers, careful planning and possible incentives could help achieve this goal. The overall aim is to create a housing market with more options for everyone.

Support for first-time buyers

Mortgage guarantee scheme

Labour’s “Freedom to Buy” scheme is designed to help first-time buyers who have small deposits. This scheme will make it easier for these buyers to get mortgages, helping more people to purchase their first home.

For this scheme to succeed, lenders need to offer good terms and be willing to participate. It’s important to track how well this scheme works in helping people buy homes without pushing up house prices.

Stamp duty adjustments

Labour is also considering changes to stamp duty to help first-time buyers. They might increase the thresholds where stamp duty starts or offer more relief to first-time buyers. Lowering these upfront costs would make it easier for people to afford buying a home.

These changes to stamp duty can greatly influence the housing market, so it’s crucial to find a balance that helps buyers without causing prices to rise too much.

Mortgage market reforms

Interest rates and mortgage accessibility

Impact on mortgage rates

Labour’s economic policies could affect mortgage rates. If their policies boost investor confidence and create economic stability, mortgage rates might stay low. However, if their policies create uncertainty, mortgage rates could rise, making it more expensive to borrow money for a home.

Keeping an eye on the economy and how it affects mortgage rates will be important for both buyers and lenders. Prospective homeowners should stay informed about potential changes in interest rates and how these might impact their mortgage options.

Mortgage accessibility initiatives

Labour wants to make mortgages easier to access. By doing this, Labour hopes to help more people get mortgages, including those with less conventional financial situations.

These initiatives might involve working with banks to develop new mortgage products that meet the needs of a wider range of buyers. Making mortgages more accessible aligns with Labour’s goal of making homeownership achievable for more people.

Rental market reforms

Tenant protections

Rent controls

Labour plans to introduce rent controls to keep rental prices stable and protect tenants. These measures aim to prevent large rent increases and provide more security for renters. By implementing rent controls, Labour hopes to make the rental market fairer and more affordable.

While rent controls can help tenants, they might also discourage landlords from investing in rental properties or maintaining them well. It will be important to find a balance between protecting tenants and ensuring landlords are willing to rent out their properties.

No-fault evictions

Labour wants to abolish Section 21 evictions, also known as no-fault evictions. This policy would prevent landlords from evicting tenants without a good reason, providing more stability for renters. By ending no-fault evictions, Labour aims to protect tenants from sudden and unfair displacement.

However, this change might make some landlords hesitant to rent out their properties. Ensuring that both tenants’ rights and landlords’ interests are balanced will be key to maintaining a healthy rental market.

Long-term market effects

Housing market stability

Political stability

A clear Labour majority could bring political stability, which often encourages transactions and investments in the housing market. If Labour’s policies effectively address housing issues and promote economic stability, the housing market could see increased activity and confidence from buyers and investors.

The impact of political stability on the housing market will depend on how consistently and effectively Labour implements its policies. Transparent communication and timely action will be crucial for maintaining confidence in the market.

Planning and development reforms

Labour aims to streamline the planning process to boost housing supply. By simplifying planning regulations and speeding up approvals, Labour hopes to make it easier to build new homes. These reforms are intended to reduce delays and make the housing development process more efficient.

Effective planning and development reforms will require collaboration between government agencies, local authorities, and developers. Ensuring these reforms are practical and address specific challenges in the housing sector will be essential for their success. By creating a more streamlined planning system, Labour hopes to support the timely delivery of new homes and improve overall market stability.

Final thoughts

Labour’s victory in the 2024 UK general election brings new housing and mortgage policies designed to make homes more affordable and accessible. By increasing the supply of affordable housing, supporting first-time buyers, and reforming rental market regulations, Labour aims to create a more inclusive and balanced housing market.

As Labour’s policies unfold, it’s important for everyone involved — prospective homeowners, renters, developers, and financial institutions — to stay informed and adapt to the changing landscape. The success of Labour’s approach will ultimately be measured by its ability to deliver on its promises and create a housing market that meets the needs of all citizens.

When considering a mortgage, always remember the importance of regular repayments and the risks associated with borrowing. Make sure you understand the terms of your mortgage and seek professional advice to help you make informed decisions and maintain financial stability.