Sir Keir Starmer resigned as Prime Minister on Monday, June 22, 2026, following heavy local election losses and the emergence of Andy Burnham as the next Labour leader. The FTSE 100 rebounded, but government bond prices came under pressure, reflecting investor anxiety and inflation fears.
Market Reaction to Starmer's Resignation
The UK 10-year gilt yield climbed to 4.81%, higher than the US (4.48%), France (3.72%), and Germany (2.96%). This indicates a heavier risk premium on British debt. According to Tony Redondo, founder and director of Cosmos Currency Exchange, "UK gilt yields face upward pressure, with the 2, 10, and 30-year at 4.21%, 4.81%, and 5.5%, carrying a considerable risk premium over economic peers." He added that while long-dated gilts are higher than the 5.1% peak of the September 2022 Truss mini-budget shock, trading lacks that era's chaotic LDI pension fund panic.
Political Transition and Market Focus
Redondo noted that the City is hyper-focused on Burnham's choice for Chancellor. "Selecting Ed Miliband would signal aggressive green borrowing that would likely unnerve already wary bond markets. Opting for Yvette Cooper would be seen as offering orthodox fiscal discipline," he said. Starmer confirmed his resignation on Monday morning, stating he had "heard the answer of my parliamentary party." He will remain in post until a new Labour leader is selected, with Andy Burnham widely tipped to replace him.
FTSE 100 Performance
According to Trading Economics, the FTSE 100 moved above other European markets on Monday. Banking stocks led gains, with HSBC up 0.9% and Lloyds Banking Group, Barclays, NatWest, and Standard Chartered all rising by nearly 2%. Shell was up 0.6%, and BP traded higher. EasyJet gained over 2%, while Babcock fell 5% after reporting a drop in pre-tax profit.
Housing Market Uncertainty
Experts warned that the housing market faces further uncertainty due to political volatility. Adam French, Head of Consumer Finance at Moneyfactscompare.co.uk, said: "Money markets had already begun pricing in fresh political uncertainty after last week's by-election results, with gilts and swap rates rising by around 10 basis points. Episodes of political volatility tend to push up borrowing costs as investors demand a greater premium for perceived risk." He added that much depends on the fiscal policies of future PM apparent Andy Burnham and other leadership contenders, particularly their approach to taxation and public spending.
Elliott Culley, Director at Switch Mortgage Finance, said the housing market needs stability: "For the housing market to recover and grow it requires stability and steadiness governing the UK. This seems almost impossible right now as another prime minister fails to last the full term." Justin Moy, Managing Director at EHF Mortgages, emphasized that who Burnham chooses as Chancellor will be pivotal: "The eyes need to be on who will take Number 11, as the Chancellor will have the greatest say in the housing market from this point on."
