Date Published 07 December 2024
Like the Budget, people's reactions can be split into two categories: "immediate" and "longer-term". Last month, the UK government bond yields (which affect mortgage rates) increased slightly and the US dollar had slightly strengthened compared to the pound. Neither action seems to indicate a very strong response other than a feeling of relief after a definite outcome.
In the future, the US will still have a growing deficit despite the situation. In addition, some of Trump's ideas may cause inflation like adding tariffs using less foreign workers and cutting taxes. His win caused US Treasury yields to rise because people think the Federal Reserve will have to keep interest rates high for a longer time. It will not help ease worries about the possibility of increased mortgage rates in the UK even though markets in this part of the world are mostly concentrated on understanding the Budget.
According to Savvas Savouri, an expert economist at Quantmetriks, if UK debt markets start to seem more appealing compared to the US more money might flow into them. This could lead to lower mortgage rates as yields decrease. The expert stated that the UK is likely to see an increase in its ownership of financial assets like bonds and stocks as well as physical assets such as real estate. However, there are many different factors pushing in opposite ways. There is doubt about whether the Labour party's plan to have private companies fund public services will bring in enough money which is making people worried about how much extra money the government may need to borrow.
People who are buying selling or refinancing their mortgage and thinking about how long their fixed interest rate will last should take note of the different factors that could affect future interest rates. However, we should keep in mind that most homeowners in the UK own their homes without a mortgage which means there is plenty of cash available in the housing market. This is important to consider when predicting changes in prices and demand.
What it could mean for prime property markets:
The US election could create chances for the high-end housing market in the UK. Trump stated that aside from the large deficit he also desires for the dollar to be weaker in order to enhance the competitiveness of the United States. This could mean that the chance for people from other countries to buy property in the UK while the British currency is low after the Brexit vote in 2016 might be ending soon. Plans to buy property may speed up as we look into this further.
Certainly, Savouri predicts that China will attempt to rival the worldwide power of the US dollar in the upcoming year. Additionally, some Democrats and high-profile individuals might choose to relocate to London in order to live under a government that better reflects their political beliefs. In the end, the party collected over a billion dollars during the election which was three times more than what the Republicans raised. The situation in the Middle East could become more tense after Trump won the election; as a result, buyers from the Gulf region might become more interested in properties in London.
