However, the effects of higher interest rates will be realised as mortgages mature this year, Mark Bogard, chief executive of Family Building Society, said.
Bogard added: “The real squeeze of increased interest rates on consumers has happened much slower than in previous cycles because so many people have five-year fixed mortgages. But it is certainly happening now for many, with more to come in 2025.
“After the Bank of England held rates at 4.75% on 19 December, the market is now expecting rates to go down only twice by 0.25% in 2025 to 4.25%. However, they could go lower; just look at what’s happening in the Eurozone, where both France and Germany are hurting and rates are falling.
“This would, of course, be bad news for savers, who’ve had the first period since 1948 when savings rates have been higher than inflation – so they’ve had a real return on their money.”
He also suggested that these factors as well as the full effects of the Budget could accelerate the slowing of the UK economy. This appeared to be already taking place, as the latest revised gross domestic product (GDP) data estimated there was no economic growth between July and September last year.
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Ban on greenfield development to boost housing
Bogard said Labour’s plans to increase housing supply through planning reform would “certainly not solve the housing crisis”, adding that the annual target of 300,000 homes only accounted for 1% of the existing housing stock.
He added: “She needs to concentrate on the other 99% and also focus more on brownfield development rather than greenfield, which will be easier to get done and generate [fewer] objections.
“If I were her, I’d ban greenfield development for 10 years.”
Additionally, Bogard proposed that “giving downsizers a stamp duty holiday would also help get older people out of under-occupied family homes, thus effectively increasing housing supply”.
He concluded: “Politics can change quickly, but if the Great British public keep forming the same view about the new Government across 2025 as they seem to have been in its first six months, firming up on what they think about the Labour brand, it may then be very hard for them to change voters’ minds, and that might mean that the real winner is Nigel Farage.”
This article was first published on YourMoney.com‘s sister site, Mortgage Solutions. Read: Borrowers will feel ‘real squeeze’ of higher interest rates this year, says Family BS CEO
