Americans have expressed mixed reactions to president-elect Donald Trump’s convincing win after experts who had spoken prior to the elections had predicted that the race to the White House between the two presidential contenders was going to be a close one.
For some people people here in the UK, Trump’s victory is complicated due to his unpredictability and the impact that can have on the global economy.
Tom Bill, head of UK residential research at Knight Frank, said: “In a similar way to the Budget, reactions can be divided into “immediate” and “longer-term”.
“By Wednesday lunchtime, UK gilt yields [which influence mortgage rates] were up slightly, and the US dollar had become marginally stronger versus the pound. Neither movement appears to signal a particularly strong reaction beyond a sense of relief following a conclusive result.
“In the longer-term, it doesn’t change the fact the US has a ballooning deficit. Furthermore, some of Trump’s plans are inflationary, including the imposition of tariffs, reduced reliance on cheaper imported labour and lower taxes.
“His victory exerted discernible upwards pressure on US Treasury yields on Wednesday in the belief the Federal Reserve will need to respond with rates that stay higher for longer.
“It will do nothing to calm nerves about the prospect for higher yields and mortgage rates in the UK, although markets this side of the Atlantic are still largely focussed on digesting the Budget.
“Bond markets have not exactly given the Budget a wholehearted thumbs-up and this week saw the weakest take-up for the sale of UK debt since December 2023.
“Beyond the short-term reaction, more money could head towards UK debt markets if it looks attractive by comparison to the US, which would put downwards pressure on yields and therefore mortgage rates, said Savvas Savouri, chief economist at Quantmetriks.
“The UK “cannot fail to see a greater share coming into its financial and physical assets.
“However, there are various forces pulling in different directions. There is uncertainty over whether the Labour plan to essentially use the private sector to fund the public sector will raise enough money, creating nervousness around how much more it may need to borrow.
“The five-year interest swap rate was trading above 4.3% on Wednesday compared to under 3.9% at the start of the month and there are concerns it could go higher if the government’s borrowing headroom narrows.
“Buyers, sellers, and anyone re-mortgaging who is considering the length of their next fixed-term should be aware of these competing forces around what may happen next to rates.
“That said, when judging what will happen to prices and demand in the UK housing market, it should be remembered that the majority of UK homeowners now own their home outright rather than with a mortgage, meaning there is no shortage of cash in the system.”
Bill believes that the US election may provide some opportunities for prime UK residential markets.
He highlights the fact that in addition to having a high deficit, Trump said he wants a weaker dollar to make the US more competitive. That would mean the window of opportunity for overseas buyers in the UK looking to take advantage of how weak Sterling has been since the Brexit referendum of 2016 may start closing and plans may accelerate, as we explore here.
“Indeed, Savouri expects China to challenge the global dominance of the US dollar next year,” Bill said. “Beyond that, a number of Democrats and high-profile individuals may decide to move to London and live under a government more aligned with their political views. After all, the party raised more than a billion dollars during the election campaign, which was three times higher than the Republicans.
“Tensions in the Middle East may also heighten following Trump’s victory, which means a number of buyers from the gulf may start looking more closely at London,” he added.
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