General election: What the Tory win means for your money

Within seconds of the Conservative win being announced, our personal finances had started to improve. At least indirectly.

Why? Because, at last, the drawn-out mess that has been British politics for the past three years might just be coming to an end. And if there’s one thing that economies, markets, employers, investors and the spending public hate, it is uncertainty.

Banking on the strong Tory win pushing the chances of crashing out of the EU without a deal, which would have hit the economy had, into the long grass, the value of the pound immediately soared in response to the news.

Few had anticipated such a strong performance at the polls though, and early on Friday morning the pound had already surged to a three-and-a-half-year high against the euro and its highest rate against the US dollar since last May.

Which is great if you’re escaping the Christmas chaos on holiday any time soon. But what will this week’s news mean for the rest of your money today, next week and well into 2020 and beyond? Here’s what the experts say.

Salary and income

For starters, the Tories pledged not to increase the rates of income tax, national insurance or VAT in their manifesto, with higher-rate payers especially now heaving a sigh of relief that their 40 per cent rate isn’t about to soar under another party.

And with high levels of employment, if businesses take the win to heart, regain their confidence in UK plc and let the brakes off their investing, we may see that trickle down to increased job security and wage growth.

Small and medium-sized businesses make up a massive proportion of the UK economy so, if delivered on, Tory pledges to help them manage rising labour costs and living wage increases could be especially important for the UK’s workforce.

This all does assume the party keeps its promises of course.

Property

Uncertainty has been keeping buyers from the property market around the country, particularly in London. so property market stakeholders might actually levitate if they get any more positive about this week’s news (despite seemingly forgetting that the property market rose and fell before the term Brexit was coined).

“This decisive general election result could deliver a massive adrenaline shot into the UK property market,” says Andrew Montlake, managing director of mortgage broker Coreco, who suggests a “huge amount” of pent-up demand could be unleashed on the market next year.

“Expect a sharp uplift in transaction levels starting early in 2020, as buyers and sellers who have played it safe put their plans into motion. Spring for the property market could come early after this comprehensive election victory.

“Although a lot of the hard work around Brexit has yet to be done, there is now a political stability that will give a lot of people the confidence to get on with their lives.

“The fact that borrowing costs are ultra-low gives people even more reason to buy and sell. Not so long ago, Brexit looked like bad news for bricks and mortar, but people will now be relieved it can finally be put to bed.

“With so much red turning blue, the property market could be at the beginning of a long Brexit bull run.”

Mortgages and debt

But the party has already been in office for nine years without making much progress on sorting out the broken housing market.

“The secretary of state responsible for housing will have fundamental challenges to grapple with, including lack of affordability, the effects of a stagnating market and a lack of innovation in both mortgage products and the house-buying process, which has excluded many would-be homeowners,” says Martijn van der Heijden, chief strategy officer at mortgage broker Habito.

“The Conservative Party made some bold election pledges to appeal to both those with a home, and young people with aspirations of buying, with promises for longer-term fixed-rate mortgages offering greater financial security and stability around mortgage costs.

“However, further pledges on housing policy weren’t the most imaginative: a million more homes of all types, ‘fairer’ shared ownership and ‘more support’ for first-time buyers. They are the right themes for an effective housing strategy, but need a lot more detail, ambition and focus to be brought to life.”

But borrowers may need to take action to lock in ultra-low interest rates on their borrowing as the uncertainty that has kept a lid on interest rates fades.

Depending on their circumstances, the amount and duration of their loan or debt, those with mortgages as well as credit cards and other credit with varying levels of interest charges should dig out their paperwork to cheap what they are paying and if they can lock in a decent rate now. While interest rates aren’t about to immediately soar, its definitely time to get on top of your spending.

Pensions & care

However controversial, we know the Conservatives will stick with the triple-lock system for pensioners, so those lucky enough to have already retired will continue to see the value of their pension rise by the rate of inflation, average earnings growth or 2.5 per cent, whichever is the greatest.

For the rest of us, the news is mixed. The pension age is set to continue to rise to 67 by 2028 and 68 by 2039 under the Tories, who didn’t announce big plans to freeze the pension age like their rivals in the election pledges.

Above all, the government must now take action on the reforms and plans that have been sidelined for years in favour of the Brexit circus.

Jon Greer, head of retirement policy at Quilter, says: “With the latest general election regular parliamentary process yet again came to a grinding halt. With the Conservatives finally securing a majority, we need the government to snap into action and deliver on some long-awaited promises.

“The Pensions Bill, which includes the pension dashboard, was finally going to get the last seal of approval before the election. Meanwhile, most people have given up on the social care green paper as a lost cause.

“With the political posturing over, hopefully these policy areas will get the attention they deserve. And with a Queen’s Speech just a week away, we could get clarity sooner rather than later. However, the dreaded B-word will likely mean we still have some time to wait for any meaningful change.”