It is perhaps not surprising to learn that mortgage lending has stagnated a little in the past month or two, given the fact the General Election is looming. The number of loans granted in February dropped slightly compared to the month before. Many experts believe this is due to the uncertainty surrounding the outcome of the election.
How can a General Election have a bearing on the take-up of mortgages?
This election is much like the last one in that the possibility of a hung Parliament is a very real one. Since no one can predict who will be in power following the vote, many people seem to be holding off getting a mortgage for the time being. No one can be sure which party will get to bring in their rules once the balance of power is decided.
Uncertainty over interest rates
Combined with this is further uncertainty over interest rates and whether or not they will rise. While they are historically low at present and have been for many months now, no one is quite sure whether they will remain that way.
However the noises coming from the Bank of England seem to indicate any change in the interest rate would be in a downward sense rather than a rising one. With that said, recent reports revealed one member of the monetary policy committee believed there was an equal chance that rates could potentially rise.
How are would-be buyers reacting?
It makes sense that people would want to take advantage of super-low interest rates and get a mortgage while they can. However no one knows which political party will be in power in a few short weeks from now. This means the current situation with regard to Buy to Let and other elements of the housing market could experience major changes if the party in power changes as well.
However many experts believe the lull in activity at present will act as a counterpoint to the upswing in activity they expect to happen during the summer months. Only time will tell whether this is the case, but once the outcome of the election is known, the housing market may settle down once more.
“Wait and see”
This seems to be the main course of action at the moment for those who are in a position to buy a new property. There is arguably even more uncertainty over the result of this election given the fact that no party seems to be well ahead in the polls. Furthermore the doubt over which of the smaller parties might hold the so-called balance of power is making many people nervous.
While the drop in the number of mortgages issued in February was not huge compared to the previous month, it was significant year-on-year. The drop was 16% according to official figures. Perhaps by this time next month, when we know which party will be in power, the market will be able to settle down once more.