Brexit: A little over a year ago, for better or worse, the UK voted to leave the European Union and go it alone.
The fallout has been many, including the resignation of one prime minister and a snap election that failed to secure a majority for another. Everything will be affected, mortgages included.
After the vote, London house prices fell by £30,000 on average. A year later, changes in house prices are still a cause for concern, as evidenced by a report from the London School of Economics (LSE) from July. It warns that a Brexit recession and a drop in real profits could cause house prices to fall.
In reality, it remains to be seen how existing mortgages will be directly affected. But there is a lot of speculation about what will happen when the deal closes.
Some recommend that homeowners protect themselves from market forces by switching from an adjustable rate mortgage to a fixed rate while they still have 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 threshold of 0.25%.
Worst of all, the opinions offered are based on the same partisan support for leave or stay. This is obviously not useful for people who are researching mortgages across a wide spectrum of media, as they should be.
In late 2016, permanency champion The Guardian urged readers to lock in their mortgage rates as soon as possible, while The Daily Express, a pro-licensing vocal body, promised that repayments could be “cut” as that Brexit unfolds.
However, for those who don’t already have a mortgage, things could be more complicated. According to the Royal Institute for Chartered Surveyors, the number of houses on the market is at an all-time low. Combined with the fact that lenders’ appetite is thin (the number of approved mortgages fell by more than 2,000 between January and February of this year), new buyers could have a very difficult time.
Going into 2018, the housing market will feel these combined forces, slowing 16% for the full year. However, estate agents Savills insist this will not be the case for long, forecasting house prices to rise again by 13% within five years.
In reality, the fate of the British property market will depend entirely on the success of the Brexit negotiations, which are now in full swing. A healthy property market will depend on the overall economic health of the UK. If the negotiations go badly, the value of the pound will fall, inflation will rise and interest rates will rise; as a result, house price growth will slow to a trickle. In turn, this will reduce the number of foreclosures, as weary homeowners wait for better days before selling.
However, all this changes if the negotiations go well. A good deal for the UK will be for economic growth to continue to hold at a positive level, boosting confidence and acting as a catalyst for house prices to rise earlier and faster than the reality we are currently facing.
Additionally, there is a wide range of other recent developments that could be having a slowing effect on the housing market. Stamp duty changes, millennials’ views on home buying and other factors could slow demand, causing housing to drop in the process. Brexit is a major, once-in-a-generation event that will undoubtedly affect all facets of British society and, as home ownership is an important part of our island’s culture, will include all aspects of mortgages , house prices and even rent. .
Really, as much as the experts postulate, only time will tell what happens. Choose to stay informed, keep an eye on interest rates and Brexit negotiations, and you’ll be better able to plan for your financial future.
