It’s about more than manifestos – interest rates hold the key to housing

Richard Donnell

The manifestos are out from the major political parties. As it’s Euro’s season, a quick word search shows a ‘score draw’ on the number of times key housing terms like housing, planning, rent or renting, first-time buyers, new homes and homelessness are used. –

The main eye-catching consumer-focused housing headlines have already been pre-trailed in the media prior to the manifesto launches, aimed largely at first-time buyers.

Labour proposes extending the existing mortgage guarantee scheme to encourage banks to lend more at higher LTVs helping first-time buyers with small deposits. Our analysis shows this will support an extra 5% more first-time buyers a year, mainly in areas with lower house prices outside southern England.

Meanwhile, the Conservatives are looking to bring back Help to Buy for new home sales to support demand for new homes. In addition, they plan to make permanent the current ‘extended’ stamp duty relief for first-time buyers up to £425,000.  This would prevent 30% of first-time buyers from paying more stamp duty from March 2025 when the current relief ends, with the benefits felt across southern England hardest.

Rental reform is also returning in both manifestos with the ending of section 21. The Labour manifesto sets a 2030 date for the introduction of minimum energy standards for rented homes. This will continue to push some landlords with lower energy-rated homes to sell.

The big structural challenge for the housing market remains demand exceeding supply. This is nothing new. It’s been a constant theme over the last few decades. It pushes house prices and rents higher, hitting those on lower incomes.

Both parties are targeting the magic 300,000+ homes a year, a target that we have never achieved since the council house-building boom of the 1970s. The Conservatives are erring towards stimulating demand through Help to Buy to support home building. Labour are focused on a raft of reforms to improve the planning process and get more ownership in local Government of the need to build homes.

Housing supply is much more than a numbers game – the key is building homes that target the pinch points in local housing markets such as more homes for downtraders or first-time buyers. What is needed in Stockport will be different to Southend. Local Government needs the funding to make better plans for housing and growth which is a feature of the Labour proposals and certainly not a quick fix.

As soon as the election is over it will be all eyes back on the outlook for interest and mortgage rates which are more likely to shape the outlook for the next 12-18 months than the roll-out of manifesto commitments.

Inflation remains sticky and wages continue to grow at close to 6%. Mortgage rates have been ticking upwards in recent weeks as expectations over the number and scale of future base rate cuts reduce. It’s hard to see five-year fixed-rate mortgages dropping below 4.5% in 2024 but these levels appear manageable for households and are supporting more sales.  The base first rate cut will certainly provide a shot in the arm for buyer confidence and would help spur a stronger autumn market ensuring housing sales grow by 10% to 1.1m in 2024.

Richard Donnell is executive director at Houseful



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One Comment

  1. Anonymous Coward


    (BTW – I’m originally a Tory voter but cannot vote Conservative because the current Tory party does not represent true conservative values, it appears to have been subsumed by the rabid far right.)

    The very most important thing that our country can do is to build for the future. Not a politician’s stupid platitude, I mean it for real:

    * Infrastructure – roads, bus lanes, railway, tube lines, cycle paths and etcetera. The country appears to be falling apart at the seams. The result of austerity that was unnecessary after the first 18 months.
    * Schools – how can a country improve if the average child’s education is impoverished? The current state of our education system is a disgrace caused by nearly fifteen years of planned neglect by the current government.
    * Health – a country is only as strong as it’s weakest link. The rest of the western world is appalled by what has been done to the NHS. Once seen as the best health service in the world that people would travel to take advantage of. Yes, on the face of it that would not seem ideal but in return a British passport was often enough to get access to another country’s version of the NHS for free when travelling abroad. A lot of people from other countries now travel home because they are terrified of poor treatment in the UK. What an horrific state of affairs. Again, planned decline organised by the current government.
    * and finally HOUSING – if there are enough good quality roads, railways, schools being used by lots of healthy people, then they need somewhere to live. Control of Housebuilding MUST be taken away from politicians who can be lobbied by the housebuilding industry. We need better quality housing in the right places, which might mean building them in the wrong places first but then encouraging said wrong place to become a right place. This requires generational planning decisions, not short term 4 year populist decisions.

    Lower interest rates with a restricted supply and too much demand will simply increase the value of property in such a way as to leave a significant percentage of the country behind. It is not the right thing to do.


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