“The United States is the biggest trading partner of the UK meaning that if these tariffs come into effect, they could increase inflation in the UK over the next year, as the United States are the UK’s biggest trade partners in both imports and exports.
“The base mortgage rates and inflation are very closely related, with the Bank of England using the base rate to control inflation, meaning ordinary Brits will be paying more for their mortgage.”
To back up his point, Sayce looked at what happened to UK house prices during US presidential terms from 2005 onwards.
The Compare My Move analysis showed US house prices historically rise 10% more during a Democrat presidency than during a Republican presidency.
UK house prices rose 2.6% through Republican George W Bush’s presidency and 8.9% through Barack Obama’s first term in office before skyrocketing 26.3% during his second.
House prices grew 11.2% during Trump’s first term before rising 15.9% under Biden.
However, those findings come with some hefty caveats.
Both Democrat-led administrations under Obama and Joe Biden coincided with two world-defining events: the 2008 financial crash and the 2020 Covid pandemic which has driven a housing market recovery over the couple of years.
Democrats were also more likely to look to international trade rather than protectionist policies, which Sayce argued are more likely to harm the UK economy by stunting house price growth.
Sayce also noted that Democrats’ prioritisation on government spending can weaken the US dollar. He argued a steady dollar reduces inflationary pressure on the pound, meaning the Bank of England is more likely to resist raising interest rates, keeping mortgage rates lower and enabling house prices to rise.
Meanwhile, Donald Trump’s stance on immigration could see a decline in the number of Brits making the move to the States.
“Even if the UK avoids direct impacts from Trump’s tariffs, his focus on tax cuts and increased government spending – particularly in areas like defence, border security and infrastructure – will likely play a central role in his presidency. These policies are expected to drive inflation in the US over the next four years while strengthening the US dollar,” said Sayce.
“A stronger dollar means the UK has to pay more for imports priced in dollars, which account for a significant portion of global trade. In fact, over 35% of the UK’s current imports are paid in dollars. This currency imbalance drives up the cost of imported goods and services, which in turn adds to inflation in the UK.
“To counteract these inflationary pressures, the Bank of England would likely raise interest rates, which would result in higher mortgage rates. This creates a direct link between Trump’s policies and the cost of living and borrowing in the UK.”
Of course, what happens in the US is not the only factor to impact on UK house prices.
Office for National Statistics data showed recently that the average house price increased by 3.3% to £290,000 in the year up to November 2024. That rise is driven by demand for homes as well as economic factors like inflation, mortgage rates as well wage growth.
Richard Donnell, executive director at Zoopla, was more mixed on how Trump’s arrival could impact UK house prices.
He estimated that average UK mortgage rates are likely to remain at or around current levels between 4% and 5%.
“UK house prices are a function of local incomes and how these are growing together with average mortgage rates, which are heavily influenced by the outlook for the cost of borrowing in the UK i.e. the base rate,” said Donnell.
“Global factors that influence inflation have an indirect impact on the housing market via the base rate and the extent to which the Bank of England needs to act to manage inflation which has fallen back to the 2% target having spiked higher over 2023. There are a range of risks to global inflation including the potential changes to US trade arrangement which could stoke inflation. It’s unclear how far this impact could be felt and the scale of any changes.”
If we learned one thing from Donald Trump’s first term, it’s that it will be difficult to predict what he will do while back in the Oval Office.
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