Mortgage affordability and the cost of living crisis. As financial markets remain in flux following the government’s mini-budget, commentators and analysts have been debating the effects of rising interest rates on the housing market. Higher interest rate expectations are leading to soaring costs of mortgage repayments for homeowners, exacerbating the already chronic affordability crisis in the UK housing market.

The housing market and the Conservative’s electoral coalition. A drop in house prices and increase in mortgage interest rates could harm the government's chances of winning the next election. Resolution Foundation’s Torsten Bell highlighted that although 50% of Conservative voters own their home outright, two in five households in Red Wall seats will be affected by rising mortgage rates. A recent YouGov poll for the Times asked respondents who is most to blame for fixed-term mortgage rates rising beyond 6%: 52% blamed the UK government, 24% blamed the global economy and 5% blamed the Bank of England. Academics Jane Green and Roosmarijn de Geus have previously highlighted the cost of living crisis could ‘very easily change’ the Conservatives’ electoral fortunes as more people become economically insecure

Could a housing market dip increase affordability? Credit Suisse have predicted house prices “could easily fall 10 to 15 percent” next year. City economist Roger Bootle argues that this “plunge in house prices is now inevitable” as interest rates constrain people's ability to afford to buy housing and demand falls through the floor. However, he notes that there may be benefits to this as, “For new borrowers, lower prices will improve affordability”, but they must fall gently as “it is in no one’s interest that they should crash” due to the risks of financial and macroeconomic instability. (For more on the relationship between the financial system, housing and land read this summary of Rethinking the Economics of Land and Housing)

  • Navigating a crash. If a wave of homeowners are forced to sell their homes, there is a risk that richer buyers (without the need for expensive mortgages) could snap up more of the UK’s housing stock, further increasing asset inequality. An independent report for the Labour Party from 2019, Land for the Many, explored the risk of falling house prices for recent buyers. Chapter 4 proposes setting up a Common Ground Trust, a publicly-backed but member-owned organisation that supports housing demand by buying up the land underneath houses being sold. Tenants apply to take out lower mortgages on the bricks and mortar, usually at only 30% of the average property price. In a situation of lower housing demand, having a public entity standing ready to buy up properties that come on the market can ensure that tenants can afford the houses being sold to protect demand. Longer term, this also “creates a mechanism for the gradual, voluntary, but potentially large scale, transfer of land – our single most valuable asset – into a form of shared ownership, so that the associated land rents can be pooled and distributed according to need (in the form of discounts), rather than captured by private landowners and banks at society’s expense.”

Could renters benefit from falling house prices? The New Statesman’s Emma Haslett explores whether falling house prices could bring a “silver lining for the UK’s beleaguered renters”. Katrina Hill, of the estate agent Chestertons, explains how decreasing mortgage affordability could lead to more homeowners renting out their houses when they need to move, instead of selling their homes at lower prices. This would, she argues, create more rental stock and provide a solution to “one of the rental market’s most inflationary problems”. However, Haslett argues that instead, landlords are more likely to pass on higher mortgage rates in the form of increased rents meaning that it is “unlikely” that renters will benefit from falling house prices. 

Weekly Updates

Climate change

UK Net Zero progress update. The Climate Change Committee has released a new assessment of the Government's progress in reducing greenhouse gas emissions in line with its legally mandated targets. Their latest update found that “only 39% of the required emissions savings are backed up by credible plans or policies…Significant risks remain in most sectors, particularly buildings, industry, aviation & shipping…Plans are insufficient for much of the agriculture and land use sector…The Government’s Jet Zero Strategy (July 2022) made no improvement to our previous assessment in June”.

Public services

Environmental causes of poor public health. Over 155 members of the Inequalities in Health Alliance signed a letter addressed to the Secretary of State for Health and Social Care, Thérèse Coffey. The coalition of public health professionals urged the minister to maintain a commitment to publishing a Health Disparities White Paper by the end of the year, and that the paper should set out “how every Department will work together to tackle the factors that cause ill health in the first place such as poor housing, lack of educational opportunity, child poverty, communities and place, employment, racism and discrimination, transport and air pollution.”

The economic cost of unaffordable childcare. Analysis by Business in the Community has found that nursery for children under two costs parents on average of 65% of one earners wage in England. The Guardian’s Alexandra Topping reports that “the number of women not working to look after family has risen by 5% in the past year, the first sustained increase in at least 30 years.


Benefit sanctions and claimants’ health. Chaminda Jayanetti reports in the Mirror that the DWP has cancelled a study looking into the impact of benefit sanctions on claimants’ health. Researchers from the University of Glasgow have been asking for the data since 2019 on the effects of sanctions on family breakups, depression and severe mental health issues.

Electoral battlegrounds and UBI. A new report from Compass suggests that “a basic income could be the key to Labour’s success in regaining its former heartlands at the next election, with three quarters of ‘red wall’ voters supporting the policy.” Their research found that the most important reasons people give for supporting UBI are the resulting health benefits, savings to the NHS, and the provision of financial security. 


Truss vs the fiscal “holy trinity”. Ed Conway’s latest blog explores how the Truss administration’s attempts to undermine the institutional power of the “holy trinity of economic policymaking”, i.e. the Treasury, the Bank of England and the OBR - backfired: “A few months ago Bank officials were deeply worried about the backlash they’d face in the coming years as they had to put up interest rates. Now, much of the blame for rising rates is landing with Downing Street instead.”

Industrial strategy

ICYMI: “Britain needs stable and credible policies, not zealotry”. The FT’s Martin Wolf gave a scathing critique of the free-market policies enacted by what he calls the “zealots” in the Truss administration and argued that they will not deliver on their target of 2.5% economic growth: “Unfunded tax cuts and investment zones will certainly not deliver this. Another big jump in inequality will not deliver this. These people are mad, bad and dangerous. They have to go.” 

  • Investing in public services after a decade of “political disinvestment”. CLES’s Sarah Longlands argues that maintaining the Conservatives 2019 electoral coalition will require “putting aside outdated fantasies about markets and growth and instead making the UK’s public services the bedrock of a future economy, providing certainty to business and a source of pride to all of us once again.”
  • The cost of lost growth. New research from the New Economics Foundation found that if Britain’s economy had performed at its pre-2008 level, the economy would have been almost £300bn bigger today, £4,400 more in nominal GDP per head.
  • Share buybacks triple. The quantity of share buybacks has more than tripled since 2015 according to new research from Commonwealth and IPPR. The buybacks boost share prices of companies, and therefore dividend payments which flow mainly to the richest. The report comes at a time which the government is planning to cut the rate of dividend taxation, costing almost £600m.