New PM and mortgage market

The new PM only needs to have three words in their inbox: cost of living. It's not complicated. This is the biggest issue facing the whole country at the moment. It doesn't matter what your policies are if half the country is in fuel poverty and business are shutting left right and centre because they can't pay to keep the lights on.

The single biggest thing that the new PM can do is to help build more homes, in the places people actually want and need to live. At the moment, we have the bulk of housing being built by a handful of national house builders, who have absolutely no incentive or interest in seeing the volume of houses increase to the level needed, as that would bring the average cost of houses down over the long term. Great for us, terrible for the profits of those builders who currently have a stranglehold on UK housing. The second thing is to help home owners make their homes greener. That means helping people pay to insulate homes with grants, making it easier and cheaper to add solar panels and incentivise people to seriously look at these types of home improvements. Maybe this could be done by linking Council Tax banding to EPC ratings in a similar way that vehicle emissions set your level of VED (Road Tax)?

If the new PM wants to help more people build wealth, a typical to-do for most conservative PMs, they need to build more houses, or phrased in a more conservative way, get more houses built. More homes means more homeowners. However, building more homes slows the growth of house prices, slowing the wealth creation of those who already have wealth. This might not be so popular with the very people that have chosen them to be PM, but what are they going to do, vote Labour?

The new PM needs to recognise that the housing market is completely broken. Both rents and house prices are sky-high and unaffordable for the great majority. In London, property prices are around eleven times average earnings. Since when did that become acceptable? The historical average is four. Just like with young people and student loans, we've become normalised to debt enslavement. Mortgage providers are now extending terms to 40-50 years, like they're somehow doing us a favour, enabling people to continue paying through the nose to put a roof over their head. In the meantime, every pound spent on servicing huge mortgage debt and rent payments is a pound removed from the real economy, supporting businesses and growth. The first thing the Prime Minister should do is either include housing costs (mortgages and rent) in the 2% inflation rate target, or set economic policy to target zero house price inflation until wages catch up and we get back to 4 x earnings. If it takes 20 years, so be it. Long-time homeowners can have no complaints, they've had it good for decades. Stopping Right to Buy and building more social housing would help as well. We need to make property affordable again. The alternative is to unquestioningly accept that house prices only ever go up. The result in the coming decades will be mass homelessness and corporations eventually owning most property. Is that really what we want for the next generation?

Mission impossible? The biggest challenge for Truss will be the strength of Sterling and hence interest rates. If she does go ahead with her widely talked about fiscal package we may see Sterling slide even further, this will mean that imports go up, as will energy as gas and oil are typically priced in US Dollars. This will further fuel inflation and increase pressure on the Bank of England to raise rates even faster. This will mean that new mortgages will become unaffordable to many, but potentially worse for the wider economy, re-mortgages following fixed rates will also be unaffordable leading to that unwelcome spectre of repossessions. Truss needs to look beyond populist policies but this is likely to prove impossible in a party that was elected on a populist mandate.