How a Donald Trump win in US election could hit UK mortgages and interest rates

The US Presidential election is in full swing with Donald Trump making considerable headway in his bid for the White House. Yet, despite the distance, the outcome has implications closer to home than one might think.

Many votes remain uncounted but a Trump victory looks virtually guaranteed at this stage, with many US TV networks calling the election for Trump already and the result will influence your personal finances. Some economists suggest that a Trump win may lead to lower US GDP and heightened inflation due to his policies on higher import tariffs and restricted immigration.

Speaking to i newspaper, Paul Dales from Capital Economics conjectured that the funds rate from the US Federal Reserve would be roughly 0.5 percentage points more than it would under different circumstances. He elaborated: "That would put some upward pressure on UK gilt yields and mean mortgage rates for UK households are a bit higher than otherwise. A more inflationary global environment may mean the Bank of England cuts interest rates by less than otherwise."

Should the Bank of England opt for fewer rate cuts, mortgage rates could remain elevated for an extended period. Peel Hunt, an investment bank, has released a report examining the potential impact of the US election on UK stock markets and domestically-based companies. This is significant for many UK residents, whether they own shares directly, through an ISA, or via their pension invested in equities, reports the Mirror.

The report also considers the potential repercussions for businesses, jobs, and wages if negatively affected. The report concludes that regardless of the winner, their policies could have "far-reaching consequences for the global economy and financial markets. " The note, penned by Charles Hall, head of research, Alexander Paterson, head of transport research, and Kallum Pickering, chief economist, states: "On balance, both pose downside risks."

After analysing both candidates' policies, they suggest that they "involve a series of anti-growth measures that – if enacted - could impair US economic performance and create risks for financial markets."

They add: "While certain policy proposals could provide some upside for certain sectors, on balance, both candidates propose a series of anti-growth measures that – if enacted - could impair US economic performance."

As the old adage goes, when the US sneezes, the world catches a cold. This could potentially affect economic growth globally, including in the UK.

"The US remains the most systemically important global economy," states Peel Hunt in its report. "As a result, a lurch to more radical policies would create major ripple effects across the globe and international financial markets. So far, we have only considered the initial effects of the candidates' platforms. However, the ultimate result of many of these proposed policies – if enacted – would depend upon the reaction of other countries."

One policy highlighted is Mr Trump's threat to impose tariffs on imported goods to the US.

Among individual stocks, Peel Hunt's analysts identified several that could be affected by such tariffs. These include Nottingham-based Games Workshop, with the US accounting for around 40% of its sales.

"Trump tariffs on imports would affect the cost of goods into the US, but we would expect these to be passed on to consumers", said Peel Hunt. Another is luxury drinks mixer maker Fevertree, with the US being its largest region by revenue, contributing 32% of group sales.

Currently, about 70% of its products are made in the UK and imported to the US. "A 20% tariff on imports is likely to have a notable impact", concluded the report.

The transportation sector, including companies like British Airways owner IAG, could be impacted by tariffs. Trans-Atlantic routes are "highly significant" for the company.

The report further states: "Tariffs may pose a significant problem for Ryanair and Wizz Air."

It is noted that currently, tariffs between the EU and US are suspended for large civil aircraft until 2026, effectively exempting Airbus and Boeing airframes and engines made in either region. However, this suspension could end earlier under retaliatory tariffs.

Jet fuel, priced in US dollars, could see cost increases for airlines if there's a negative currency reaction to the election result. Furthermore, if Kamala Harris wins, America's corporate tax rate could rise, affecting profits.

Oil and gas companies will also be closely monitoring the election outcome. As Peel Hunt points out: "Decarbonisation policy has emerged as a top election issue in the US. " A Trump victory could lead to relaxed climate targets, although even the Democrats might have to scale back their climate commitments due to fiscal and debt challenges across major economies.

This could extend the dominance of oil and gas in the energy mix, as the development of renewable energy and low-carbon alternatives may fall short of government targets.

Defence companies could be affected by the outcome of the election. The report states: "Whilst both candidates plan to increase defence spending, Trump plans to reduce or eliminate assistance for Ukraine, which may have implications for global security."