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What Labour’s big win means for pensions, mortgages and your finances
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The Labour Party has made a number of promises that will impact household finances, but upon taking power it will also face significant challenges with cost of living pressures continuing to exert their grip.
Sir Keir Starmer will be the UK’s new Labour Prime Minister after the Conservative defeat saw former Prime Minister Liz Truss and a dozen serving cabinet members lose their seats.
Outgoing Prime Minister Rishi Sunak said he took responsibility for the election defeat inflicted on his party, which suffered its worst result in its history.
At a victory rally in London, Sir Keir said the country could now “reclaim its future”.
He told jubilant activists: “We did it,” adding: “Change starts now.”
Here’s a look at what’s coming in the coming months:
The real estate sales market
A decisive general election result could help boost confidence in the property market and encourage potential investors to put their plans into action.
Tim Bannister, real estate expert at Movement to the rightsaid: “We can see from our data that in previous election years there has been a slight recovery in house-moving activity after an election has taken place – so the same could be true this year in the short term, particularly in the context of a potential bank rate cut on the horizon and reduction in mortgage rates.”
Sales are already improving. HMRC figures show that UK property sales rose for the fifth consecutive month in May.
Halifax said Friday it believes home values will likely rise modestly this year and through 2025.
The Bank of England The UK’s base rate is expected to be cut at some point, which will ease costs for some mortgage holders. Many of Britain’s biggest lenders are already cutting their mortgage rates this week.
However, many of the 1.6 million fixed-rate mortgages ending this year still face much higher rates than they were previously accustomed to.
house construction
Labour has promised to “build Britain back up again” by creating jobs across England with 1.5 million new homes during the next parliamentary term.
The company said it will support local authorities by funding additional planning officers and plans to strengthen planning obligations to ensure new developments provide more affordable housing, as well as supporting councils and housing associations.
Charlotte Nixon, mortgage specialist at Quilter, said: “It is crucial to recognise that such ambitious targets have historically been challenging to achieve.
“The success of this initiative will depend on unwavering commitment, significant resources and effective execution. Building 1.5 million homes in five years is a monumental task that requires not only political will, but also the cooperation of local authorities, private developers and communities.”
William Beardmore-Gray, senior partner and group chairman at property firm Knight Frank, said: “We are hopeful that the outcome of this election will end the long period of political uncertainty that has negatively impacted the property sector.”
Tenants
The Labour Party intends to prioritise the construction of new social rental housing and better protect existing stock.
The party has also promised to abolish “no-fault” section 21 evictions and give tenants the power to challenge unjustified rent increases.
According to figures released by Rightmove earlier this week, the average monthly rent charged across Britain, excluding London, hit a record £1,316 in May. That was around 7% higher than the previous year.
Ben Beadle, chief executive of the National Residential Landlords Association (NRLA), said: “We stand ready to work constructively with the new Government to ensure that changes are fair and workable for responsible tenants and landlords and are sustainable for years to come.
“It is vital, however, that the reform does not exacerbate the chronic shortage of rental properties to meet demand.”
First-time buyers
Labour is planning a Freedom to Buy scheme, as well as giving first-time homebuyers preference on new developments.
Your home building plans may also help some aspiring homeowners who are struggling to buy.
Ms Nixon said: “Without a significant increase in the supply of truly affordable homes, schemes like Freedom to Buy offer limited relief to those priced out of the market.”
Tax
Labour has promised not to increase national insurance (NI) or income tax rates.
He also said he would tackle “injustice” in the tax system “so that everyone who lives here in the UK pays their tax here”, as well as cracking down on tax evasion.
Laura Suter, personal finance director at AJ Bell, said: “While Labour has not promised income tax rises in its manifesto, it is allowing an increase through the back door on day one. That’s because it is not ending the deep freeze in income tax thresholds brought in by the Tories.”
Some have suggested that Labour may also need to look for extra revenue in other areas of the tax system.
Pensions
The triple lock on the state pension, which ensures the state pension rises each year in line with inflation, earnings or by 2.5% – whichever is greater – will be retained by Labour.
Some commentators have suggested that while the triple lock provides a vital safety net for retirees’ income, maintaining it will be a challenge given the ageing population and issues around intergenerational fairness.
Labour has also promised to “undertake a review of the pensions landscape to consider what additional measures are needed to improve pension outcomes and increase investment in UK pension markets”.
Patrick Heath-Lay, chief executive of the People’s Partnership, which provides the People’s Pension, said: “I hope Labour’s pensions review will help to revitalise the consensus that drove the success of auto-enrolment and create a roadmap for the future.”
He added: “There are also ‘day one’ challenges for the new ministerial team. The pensions dashboard programme (an initiative that will eventually allow people to see all their pensions in one place online) is progressing, but ministers must address key project documents that still require approval, and this must happen quickly if larger schemes are to connect to the dashboard infrastructure in April.”
Financial markets and the economy
Jason Hollands, managing director of Bestinvest, the online investment platform, said: “Having carefully cultivated relationships with the City and the business community, Keir Starmer and Rachel Reeves will be mindful of the need to build trust with the financial markets.
“At least in the short term, I hope the Labour Party sticks to the policies set out in the campaign, rather than launching radical and surprising new policies out of the blue.”
Chris Forgan, portfolio manager at Fidelity International, said: “The economy is recovering from a slowdown in 2023 and the outlook is improving. First-quarter growth was driven by a surge in consumer spending, while real disposable incomes also rose for the second consecutive quarter.
“Consumers are saving more, which could support further growth next year as confidence builds and savings are converted into spending.
“The inflation picture also looks brighter. Services inflation is still higher than the Bank of England would like, but we believe it will start its rate-cutting cycle soon, which should further stimulate economic activity.”
Victoria Scholar, head of investment at Interactive Investor, said: “The relaxed mood in financial markets reflects the fact that Labour’s landslide victory had long been predicted by polls and was therefore already priced into market prices.
“(Sir Keir) Starmer tried to appeal to the markets during his election campaign by positioning Labour as a pro-business party and refraining from announcing plans for major tax increases.
“In stark contrast to Liz Truss’s ill-fated mini-budget in 2022, which sent bonds and the pound tumbling, the current lack of market volatility and subdued price action suggests that investors and traders view the latest election result as a democratic vote in favour of a new political era that represents stability and calm.”