General Election: Four ways the result could affect expats in the EU

While some issues, like pensions, hang over every general election, tomorrow’s vote puts the ballot box in charge of some once-in-a-lifetime decisions.

Here are four ways the UK election could affect you as an EU expat.

Mortgage payments

If you have a UK mortgage, your premiums could be affected by the winner of the election. This is because mortgage rates are influenced by the interest paid (the “yield”) on UK government gilts – long-term investments the government sells in order to raise money.

Banks package together mortgages and sell them to investors. Due to their duration – usually around 25-30 years – this makes mortgage-backed securities a rival product to gilts. 

So banks often try to set mortgage rates slightly higher than UK gilt rates in order to entice investors away.

Political instability changes the demand – and therefore the price – of gilts. When prices rise, yields fall and vice versa. 

A strong victory for the Conservatives is likely to see gilt yields fall, while a hung parliament or Labour victory could push them higher. This may make your mortgage premiums more expensive.

Pensions

Your state pension is likely to be affected by the result of the election.

Theresa May has toyed with the idea of scrapping the Triple Lock – the mechanism that keeps your state pension increasing by the larger of inflation, wage growth, or 2.5 per cent each year. 

The Tories would replace this with a Double Lock.

Labour have guaranteed that the Triple Lock will remain in place for the duration of the next parliament if they get into power, meaning your income is protected for the next five years.

Residency rights in the EU

Both parties want to protect the rights of UK citizens already living in the EU.

Theresa May has claimed that EU citizens already living in the UK will see their rights to permanent residency guaranteed if UK nationals living in the European Union are treated in the same way.

Labour, however, want to give unconditional guarantees to EU citizens. 

What happens to your rights depends upon whether the EU would respond better to tough talk from May or a softer approach from Jeremy Corbyn.

Exchange Rates

The pound to euro exchange rate is already down -4 per cent on its 2017 best of €1.197 seen in April, although it is trading over a cent above Sunday’s three-month low of €1.139. 

Anyone sending £100,000 overseas now would get €113,900, but in April they would have received €119,700 – leaving them €5,800 better off.

A firm majority is what the markets want to see, as this is the most politically stable option from their point of view. 

If the Conservatives get a landslide win, the pound is likely to strongly recover from its recent weakness. 

If Labour were to get a firm majority then GBP could see kneejerk weakening before appreciating again.

A hung parliament would be the worst outcome from a market point of view, so sterling could strike a fresh low this year if this were to happen.