TAGS: #brexit
Brexit – it’s just over a year ago that, for better or worse, the United Kingdom voted to leave the European Union and strike out on its own.
The knock-on effects have been many, including the resignation of one prime minister, and a snap election failing to secure a majority for another. Everything will be affected, mortgages included.
In the vote’s aftermath, London house prices dropped £30,000 on average. A year on, house price changes continue to cause concern, evidenced by a report from the London School of Economics (LSE) this July. It warns that a Brexit recession and a fall in real earnings could cause a house price crash.
In reality, it remains unseen as to how existing mortgages will be directly affected. But there is a lot of speculation about what will happen when the deal is done.
Some are recommending that home earners protect themselves from market forces by switching from a variable to a fixed-rate mortgage, while they still have the time. However, there is absolutely no guarantee that this is the best course of action. It will depend entirely on the actions and decisions of Bank of England governor Mark Carney, and whether or not he chooses to raise interest rates above the historically low 0.25% threshold.
Worst of all, opinions being offered are based on the same partisan support for leave or stay. This is obviously unhelpful for people who are doing their mortgage research across a wide spectrum of media – as they should.
In late 2016, remain champion The Guardian urged readers to fix their mortgage rates sooner rather than later, while The Daily Express, a vocal organ for leave, promises that repayments could be ‘slashed’ as Brexit develops.
For those who don’t have a mortgage yet, however, things could be trickier. According to the Royal Institute for Chartered Surveyors, the number of houses that are on the market are at a record low. Combined with the fact that lender appetites are slim – the number of approved mortgages fell by more than 2,000 between January and February of this year – and new buyers could be in for a very tough time indeed.
Going into 2018, the housing market is set to feel these combined forces, slowing down some 16% for the year as a whole. However, estate agents Savills insist that this will not be the case for long, predicting that house prices will rise again by 13% in five years time.
In reality, the fate of Britain’s housing market will depend entirely on the success of Brexit negotiations, which are now in full swing. A healthy property market will depend on UK economic health overall. If negotiations go badly, it will cause the pound to drop in value, inflation to surge and interest rates to rise – then house price growth will slow to a trickle as a result. In turn, this will reduce the number of mortgages, as weary homeowners hold out for better days before selling up.
However, this all changes if negotiations go well. A good deal for the UK will see economic growth continues to stay at a positive level, boosting confidence and acting as a catalyst to see house prices rise earlier and faster than the reality we currently face.
Additionally, there are a wide range of other, recent, developments that could be having a slowing effect on the housing market. Changes to stamp duty, Millennial views on house buying and other factors could slow demand, causing houses to drop in the process. Brexit is a major, once-in-a-generation event that will undoubtedly affect every facet of British society and, as home ownership is a major part of our island’s culture, that will include every aspect of mortgages, house prices, and even renting.
Really, as much as the experts postulate, only time will tell what happens. Choose to stay informed, keep your eye on the interest rates and Brexit negotiations, and you will be able to better plan ahead for your financial future.