UK General Election 2024: Impact on mortgage rates and house prices 

Last updated by Claire Flynn on 14 June 2024

In this article:

• Will the General Election affect mortgage rates?

• Recent news on the election and mortgage rates

• How increased interest rates could affect voters

• Will the General Election affect house prices?

• Should I wait until after the election to get a mortgage?

Will the General Election affect mortgage rates? 

It’s important to note that mortgage rates are not directly set or determined by the government. Mortgage rates are set by lenders, and influenced by multiple factors. One of these is the Bank of England base rate of interest. 

The Bank of England is a public body that is accountable to both the government and the people of the UK. But in 1997, it was granted independence in certain areas so that the organisation is free from party-political influence.

Essentially, this means that whichever political party is in charge should not directly impact changes to the base rate. The MPC makes their decisions based on wider economic factors, in particular the rate of inflation in the UK. 

However, political events such as elections can still cause economic disturbances that can, in turn, impact interest rates. This is usually just due to the additional uncertainty brought about by elections.

Since the date of the General Election was confirmed on 22 May:

• The average swap rate (the amount lenders pay for funding for a fixed period) for a two-year fixed-deal rose from 4.5% to 4.7%, but has now fallen down to 4.5%

• The average fixed mortgage rate across five of the biggest lenders rose from 5% (which it had remained at since mid-May) 5.1% on 3rd June and has stayed there*

• Some lenders have increased rates on selected mortgage products, including HSBC, TSB, Barclays and Leeds Building Society 

Will mortgage rates fall after the General Election? 

Naturally, mortgage borrowers and aspiring first-time buyers will be hoping that mortgage rates will fall after the General Election. But will they?

John Fraser-Tucker, the Head of Mortgages at Mojo Mortgages said: “It’s very difficult to predict exactly how mortgage rates will change after the General Election given the volatility and uncertainty surrounding the election and housing market overall. 

“Whilst some mortgage borrowers might hope for falling rates post-election, numerous factors such as inflation, base rate decisions, and lender reactions make it challenging to forecast definitively.”

Despite the base rate remaining at 5.25% since August, mortgage rates have been very changeable. We’ve analysed our internal data to uncover the average fixed mortgage rate from five of the biggest UK mortgage lenders from our panel (Santander, Nationwide, Natwest, HSBC & Halifax) at the time of each base rate announcement.

The next Bank of England base rate announcement is on 1 August. With inflation now down to the target of 2%, some may have hoped for a reduction. But figures released recently suggest wage growth remains relatively strong.

The Bank of England considers wage growth in its interest rates decision as well, so these figures may make them less inclined to reduce it. But it's impossible to predict for certain.

Recent election and mortgage rate news

Will mortgage rates influence voters at the election? 

According to YouGov, their survey of voting intentions on 13 June showed that 37% of people will choose Labour in the next election. 18% have stated they would vote for the Conservatives while another 19% are planning to vote for Reform UK. 

There are lots of factors that impact how people may choose to vote. But increasing mortgage rates and the wider cost-of-living crisis that has affected many people in the UK could be playing in voters’ minds. 

When Conservatives came to power in May 2010, after the 2008 recession, according to the Bank of England the average rate for a two-year fixed-rate mortgage at a 75% loan-to-value (LTV) was 3.78%. 

In May 2015 when they were re-elected, it was 1.9%. And in May 2017 and December 2019, it was 1.49% and 1.42% respectively. Now, the average two-year fixed-rate mortgage (75% LTV) sits at 5.00%. 

For context, someone with a £200,000 mortgage and a 25-year term faces an additional £378 a month if they move from a 1.42% rate to a 5% rate. That’s an extra £4,536 per year. 

How has the current government managed rising mortgage rates? 

The Conservative government worked with lenders to create the Mortgage Charter to help borrowers struggling with increased mortgage repayments.

This introduced a number of potential easements, including switching to interest-only mortgages for a period of time or extending the mortgage term. 

However, these easements came with some disadvantages too, namely that borrowers would wind up paying more interest overall if they opted for one of them. 

Given how many people have been impacted by rising mortgage rates in the UK, it’s possible that this might influence votes on 4th July. 

How the base rate and mortgage rates have changed since the Conservatives came to power in 2010

The below highlights the significant impact of the Bank of England's base rate decisions on mortgage rates, with borrowing costs for homeowners having risen substantially in recent years.

Source: Bank of England

Some of the key dates above include:

• In May 2010, the Conservatives came into power after 13 years of Labour rule.

• In March 2020, during the Covid-19 pandemic, the Bank of England slashed the base rate twice to a record low of 0.10%, and the average 2-year fixed mortgage rate fell to 1.4%.

• After over a decade of ultra-low rates, the Bank of England started raising the base rate in December 2021 to combat rising inflation. The base rate had increased from 0.25% to 5.25% by August 2023, while the average 2-year fixed mortgage rate climbed from 1.57% to 6.18% over the same period.

• The September 2022 mini-budget caused severe economic turbulence, resulting in a spike in mortgage rates. The average 2-year fixed rate peaked at 5.98% in November 2022 when the base rate was 3.00%.

Despite the base rate holding at 5.25% since August 2023, mortgage rates have remained volatile compared to the pre-pandemic period. 

Will the General Election affect house prices? 

Many are also wondering whether the General Election could impact house prices or the housing market generally. Sometimes elections can cause buyers and sellers to delay their plans, slowing the market. 

Richard Donnell, Executive Director at Zoopla said: "The election announcement is likely to stall the pace at which new sales are being agreed in the coming weeks as we run up to the start of the summer slowdown.

"Most buyers well into the home buying process close to agreeing a sale will ideally want to push through and agree to sales now. Those who are earlier in the process may look to delay decisions until the autumn after the election is over.

"Overall, we don’t see the election having as big an impact as in previous years, particularly as there is not a huge divide in policy between the two main parties and with few specifics on housing other than a focus on reforming the private rental sector and boosting housing supply. 

“However, sales completions over 2024 may now fall slightly short of the 1.1m we expected for 2024. “

Will house prices fall after the General Election?

In Zoopla’s May House Price Index, they reported that house prices remained relatively stable in April, with the average property price remaining the same as March and just a 0.1% decrease year-on-year. 

Flats saw the greatest year-on-year decrease at 0.6%, followed by detached houses at 0.5%. But terraced and semi detached houses saw 0.9% and 0.6% increases respectively. 

There are also different trends in different parts of the UK, with parts of southern England showing small decreases in average property price, while the rest of the UK is showing modest growth. 

It’s difficult to know exactly what will happen to house prices after the election. If mortgage rates rise after the election, further constricting affordability, this could affect property prices.

On the other hand, if rates do fall in the second half of 2024, we could see house prices rise as buyers gain more confidence. 

How house prices have changed since the Conservatives came into power in 2010

The table below shows how the average house price has changed in the UK in the 14 years since the Conservatives were elected in May 2010. 

Source: UK House Price Index

This shows a steady increase in the average UK property price since the Conservatives came into power in May 2010. From £170,846 in May 2010, the average price has since risen to £282,776 by March 2024, an increase of around 65%.

The sharpest annual increases were seen in 2021 and 2022, likely driven by a surge in property market activity after the pandemic. Whilst prices dipped slightly in 2023 as interest rates increased, the overall trend has remained upwards under Conservative rule.

Should I wait until after the election to get a new mortgage?

Whether you’re buying a new property or remortgaging your existing one, getting a new mortgage in the current market likely seems a bit daunting. As well as changing mortgage rates and deals, you’ve now got to contend with the uncertainty of a General Election.

John Fraser-Tucker, Head of Mortgages at Mojo, commented: “Whether it’s the right time for you to get a new mortgage depends on your personal and financial circumstances.

“For those whose mortgage is going to end very soon, the average standard variable rate is still above 8% while the average fixed rate is currently 5.1%*. So, waiting for rates to fall before you remortgage could be an expensive strategy. If you decide to do this, make sure to budget for any monthly increases you face in the short term.

“And if you are considering buying a property, remember that the one you like the look of might not still be on the market in a month’s time.

“If you are likely to need a new mortgage in the next six months, whether for a new property or your existing one, it’s worth speaking to an experienced mortgage broker, like our Mojo experts.

“They can recommend the best deals for you, advise you on the current market and what your monthly repayments could look like, and answer any other questions you may have.”