That’s the overwhelming message from mortgage experts who responded to the Prime Minister’s announcement in Downing Street this morning that he will stand down as Labor leader.
The British pound fell slightly after the announcement, which was not a huge surprise to the markets.
But while the Prime Minister’s resignation, after weeks of speculation, will provide some certainty to markets – there is expected to be more uncertainty ahead as we wait for Keir Starmer’s successor and more details about his fiscal policy.
Here’s more on how this will affect your mortgage rates now and in the next few months.
How does Keir Starmer’s resignation affect mortgages?
Fixed-rate mortgages, the most popular type of mortgage product, are priced using swap rates and are affected by the economic and political climate.
Immediately after Keir Starmer’s speech, the pound fell and swap rates rose. The announcement was expected, so these moves were not significant.
But that’s the way it goes when the new prime minister – expected to be Andy Burnham, the newly appointed MP for Makerfield – takes his stand which will have a greater influence on mortgage pricing in the future.
Adam French, head of consumer finance at Moneyfactscompare.co.uk, said: “Periods of political volatility tend to raise borrowing costs as investors demand a greater premium for perceived risk.
“Much will now depend on the fiscal policies put forward by future Prime Minister Andy Burnham and anyone else vying for the Labor leadership, especially their approach to tax and public spending.”
What will be the immediate impact on your mortgage?
There is likely to be little change in the short term for mortgages following today’s announcement by Keir Starmer.
Some experts believe that the increase in swap rates may mean that the recent cuts in mortgage interest rates will end. But others think it won’t make any difference in the short term.
Richard Davidson, Mortgage Advisor at onlinemortgageadvisor.co.ukSpeaking to Newspage, he said: “The change of prime minister grabs the headlines, but it doesn’t change anyone’s monthly mortgage payment overnight.
“What really moves interest rates is whether markets remain calm during the delivery process, and the early signs are that everyone in the race has learned the lesson of 2022 and will not approach an unfunded budget that scares away lenders.
“Basic price It reached 3.75% last week The fixed trades have been slowly falling, so an orderly transition should keep this gentle downward trajectory on track.
What advice for borrowers looking for a deal now?
Being ‘among the prime ministers’ could be uncertain for house movers and those looking to remortgage, as it is now unclear what will happen to housing or fiscal policy.
However, the advice of mortgage experts is to focus on your own plans, rather than being guided by politics.
In fact, Davidson added: “My advice to anyone buying or remortgaging is not to sit back and wait for political certainty, because it almost never arrives. Draw up your deal now and you can usually switch if something better comes along before it’s done.”
Adam French echoed this advice. He said: “For those due to take out a new mortgage later this year, there are steps they can take to reduce their risk of exposure to rising interest rates.
“Many lenders allow borrowers to secure a new deal up to six months before their existing mortgage expires, providing valuable protection in the event of uncertainty causing interest rates to rise in the meantime.
“If rates fall, borrowers can usually switch to a cheaper deal before closing without penalty.”
What would happen to mortgages if Andy Burnham became Prime Minister?
What might the appointment of Andy Burnham as Prime Minister mean for anyone thinking about the longer-term outlook for the mortgage and housing market?
The new Makerfield MP is believed to be in favor of scrapping stamp duty, which could provide a real boost to the housing market.
On the other hand, Burnham will likely come under significant investor scrutiny, which could spook bond markets. Who he appoints as advisor will also be crucial.
Riz Malik, independent financial advisor at R3 Wealth is based in Southend-on-SeaSpeaking to Newspage, he said: “If Burnham comes in and sets a timetable for stamp duty reform, the housing market could be revitalized. Without that, it carries a greater risk that a negative bond market reaction could impact mortgage pricing.”
