Political instability could stifle market

22 March 2010

It’s possible that by the time you read this we’ll know the date of the general election. With less than two months until the expected polling day we are entering uncharted territory.

Two months is not a long time to wait but if the narrowing indicated in the opinion polls is correct we could end up with a hung Parliament.

The markets are worried about such a result and the pound fell heavily at the start of the month, indicating another unknown - how quickly the UK’s massive deficit can be cut.

Latest research shows that the public feels that even if the Tories take control it will make no difference to the mortgage and housing markets.

But while the impact may not be evident in the short term a clear winner would at least bring an element of certainty.

Every government has an effect on the mortgage and housing markets by design or accident. This will certainly be the case if the country elects David Cameron as Prime Minister.

We will be looking at a range of industry-changing policies including the disbanding of the Financial Services Authority, the abolition of Home Information Packs and a commitment to look at the potential of equity release in tackling the lack of pension provision.

So while a new government with a stable majority will have an effect in the medium term, one without a clear mandate is likely to produce yet more market volatility in the short term.