Mortgage professionals warn political uncertainty could push swap rates higher if Andy Burnham's spending plans unsettle bond markets
Keir Starmer's resignation as prime minister has prompted immediate concern from mortgage professionals about the impact on swap rates and housing market confidence, with industry figures warning a more left-leaning successor could drive mortgage pricing higher.
Starmer announced his departure outside 10 Downing Street on Monday morning, stating he would remain as caretaker until a new Labour leader is chosen.
Andy Burnham, the former mayor of Greater Manchester, is widely expected to succeed him following Wes Streeting's decision to back his candidacy rather than stand himself.
Swap rates and mortgage pricing
Mark Harris, chief executive of mortgage broker SPF Private Clients, said the initial market reaction suggested investors had anticipated the move.
"Starmer's resignation comes as no surprise, reflected in the marginal change in swap rates – which underpin the pricing of mortgages – with a small rise of one to two basis points following the announcement," Harris said.
Swap rates are used by lenders to price fixed-rate mortgages, meaning any sustained rise feeds through directly to borrowers. Harris noted the apparent consensus around Burnham had so far limited volatility.
"With Wes Streeting now apparently backing Burnham, it seems a coronation rather than a contest will happen, which will hopefully be smoother," he said.
However, Harris flagged concerns about Burnham's previously stated attitude toward bond markets and what a new chancellor could mean for pricing.
"Burnham has previously made comments about not being a slave to the bond markets, but we suspect he will have to row back on that once he is prime minister," he said. "If talk of further borrowing in his speeches comes to pass, gilts and bonds will become more expensive, leading to higher swap rates and accordingly mortgage rates."
Harris also highlighted the significance of the Chancellor appointment, a role currently held by Rachel Reeves. "The markets will also be nervous about the next chancellor. They are comfortable with Reeves, but should a more left-leaning PM and chancellor be installed, this will have an upwards impact on pricing."
Housing market confidence
Beyond rate pricing, industry figures warned the leadership transition risks compounding an existing confidence problem in the housing market.
Jeremy Leaf, a north London estate agent and former residential chairman of the Royal Institution of Chartered Surveyors (RICS), said the priority must be a swift and stable handover.
"What we are looking for is the shortest possible handover of power to reduce that instability and transition towards a more growth-orientated agenda where prospective owners and tenants can more readily aspire to homeownership and better rentals," Leaf said. "Unfortunately, the lack of direction has prompted too many people to sit on their hands rather than getting on with their lives when it comes to their properties."
Leaf said housing policy had been a missed opportunity under Starmer, and a reset under new leadership represented a chance to rebuild momentum.
"I am sure what Andy Burnham and Keir Starmer could agree on is the importance of additional activity in the housing market, which is not only good for property but the wider economy in view of its multiplier effect," he said. "After a promising start, unfortunately Starmer seems to have lost touch with what people on the ground want and need from their housing."
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