Sam Dunn: 'How will the election affect the market?'

House Doctor
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The Independent Online

Question: Should we buy before or after the general election? We've managed to save a solid 20 per cent deposit and know where we'd like to buy, but wonder if – after a new government has been formed – circumstances might be different. Nicola Gelberson, Kent

Answer: A general election is certain to give us plenty: muck-raking, fiscal claims and counter-claims, photo opportunities with babies, "scandalous" allegations of policy-making "on the hoof", and a possible change of governing party.

But that certainty doesn't stretch to the housing market. The nature of polling day – voters' fear of change, and anxiety over spending cutbacks and possible new taxes – has an unsettling effect on the market.

And if there's one thing that any sort of market hates, it's uncertainty – deterring both buyers and sellers and stifling activity.

"The possibility of a hung parliament adds to the uncertainty and is likely to encourage many buyers and sellers to wait," says Gary Smith, the president of the National Association of Estate Agents.

And it's already had an impact on the pound. Worries that no overall party majority could delay action on reducing Britain's budget deficit – and clobber Britain's status by ratings agencies – saw sterling take a tumble. And with mortgage rates affected by the wholesale money markets, which fluctuate to financial pressures, such as higher yields on government bonds, home loans could be affected.

Such higher yields can have a price – more expensive wholesale funding, which can translate as more expensive mortgages.

If the Conservatives win outright, then the Home Information Pack is set to be scrapped – which could give a fillip to prices as it'll make it cheaper for sellers to put their property on the market, adds Smith.

Another Labour win would most likely see "a continuation of low interest rates encouraging buyers into the market", he adds.

On the surface, there isn't much for buyers or sellers to fret about: no party has any plans – not openly, at least – to change stamp duty or introduce radical new property taxes.

But events such as the credit crunch can force policy changes overnight.

In this case, says David Hollingworth of mortgage broker London & Country, your best bet is to put politics to one side.

Ignore the vagaries of the forthcoming election – "it's unlikely that there will be dramatic pre- and post-election differences in the housing market" – and decide what's right for you today.

"And if you're worried about interest rates rising post-election, then go for a two- or three-year fixed-rate mortgage to set your monthly payments."