With Britain expecting a general election later this year, the ruling Conservatives and Labour opposition are drawing up rival plans to help a key demographic: aspiring homeowners. An affordability crisis linked to decades of underinvestment in new homes — plus years of rock-bottom interest rates that pushed up property values — have piled pressure on Prime Minister Rishi Sunak’s Conservatives to ease the pain for home buyers. Housing costs were inflated partly by economic mismanagement under former premier Liz Truss, and the Tories are anxious to restore their credibility on mortgage policy to make a dent in a 20-point polling deficit versus Labour.
Home ownership is out of reach for many Britons. The average UK house cost around nine times average earnings in late 2022, the highest since 1876. Mortgages for first-time home buyers were a little more affordable when the Bank of England’s benchmark lending rate was near zero, but it’s now at 5.25%. That also inflates costs for existing home owners. Those who rent are also taking a hit as their landlords often secured the properties using mortgages and are now raising rents to offset the higher interest payments. The Conservatives are traditionally known for having the support of landlords, and many Members of Parliament are landlords themselves.