June 15th, 2017
Last week’s surprise UK General Election result and the subsequent hung parliament has not affected today’s decision by the Monetary Policy Committee (MPC) of the Bank of England to keep interest rates at a historic low of 0.25% as policymakers continue to remain cautious as the country embarks on the imminent Brexit negotiations.
What do industry experts say?
Emiel van den Heiligenberg, head of asset allocation at Legal & General Investment Management, says: “Post-referendum, the UK economy has been helped by a buoyant labour market and low inflation. However, economic surveys suggest that companies are cautious about hiring plans and downbeat about business investment intentions. Much will hinge on how the negotiations with the EU take shape, and whether transitional arrangements can avoid a ‘cliff effect’.
Danny Cox, a chartered financial planner at investment firm Hargreaves Lansdown, says the value of Sterling may remain low until the markets can see a positive outlook for the British economy.
“The currency is perhaps the best bellwether of the market’s view of the state of an economy and where it is expected to go in future,” he says. “An expectation that there will be a slowdown in the economy would ultimately mean lower interest rates in the UK for longer.”
Stockbroker The Share Centre says that if economic data continues to be strong, the BoE may feel the need to signal the change in direction of the interest rate cycle and nudge rates up 0.25% later this year.
What effect will the election have on the mortgage market?
The election is likely to cause high levels of uncertainty in the UK house market, and experts are urging the government to quickly resolve issues to prevent a slump in the market.
The housing market thrives on certainty, and the result could cause negative “ramifications” for the country’s housing market according to experts in the industry.
Philip Woolner, Joint Managing Partner at Cheffins, warned: “The fact that the UK is about to enter a situation with a hung parliament is bound to have ramifications for the property market.
“He claimed that both the Labour and Conservative policies on housing could both benefit the market, but that an uncreative hung parliament situation may mean they can’t deliver – causing more issues for those struggling to get on the property ladder.”
Other experts appeared to be in agreement, urging that stability needs to be established soon if the UK property market is going to prosper.
“The property market thrives on confidence and it’s important the uncertainty of a hung parliament is quickly resolved and a clear strategy is set out to tackle housing shortfalls, particularly in London,” John East, Director of KFH Land and New Homes, said.
They claim “all corners of the economy” need confidence before the housing market can flourish in the new political climate. And while many homeowners, sellers, and buyers might be nervous about the outcome the General Election will have, Director of Legal & General Mortgage Club, Jeremy Duncombe, says there’s nothing to worry about.
The mortgage market has remained very resilient during many UK based and global challenges over the last few years and there is no indication that it won’t continue to do so.
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