The effect of BREXIT is still uncertain but it is creating volatility in the UK’s financial marketing and housing and mortgages are no exception.
Every since the UK voted to Leave the EU there has been speculation around the housing market and that there could even be another recession around the corner. Already the major housebuilders shares have fallen and estate agents are beginning to worry.
So how could BREXIT affect you and your home purchase or sale? Currently know one knows but there are some things that have already happened and something to factor in if you are looking to move home or Invest. I’ve had a number of questions come in and here are some of my thoughts on those but like most things only time will tell.
What will happen to house prices?
This is the question I get asked the most. And it’s one that BREXIT could have the biggest impact on it could potentially see those huge price increases slow as buyers and investors rethink their position and what they are happy with in terms of exposure to risk. But then again it could also have the opposite effect. Currently the value of the pound is down meaning that cash rich foreign investors now can get more for their buck!
So this could see an influx of activity in the UK residential and commercial space for investors. The short and long term effect of this could be an increase in house prices and an increase in rents as there would be fewer properties on the open market which causes demand to increase.
Also with house builders share prices falling and this directly affecting the construction rates this will continue to mean there is a lack of supply which should see the prices stay fairly stable.
I’m a first time buyer how does BREXIT affect me?
This depends on two major factors, the Bank of England and Mortgage companies. If the banks cut the base rate by 0.25% which Governor Mark Carney has hinted he might decide to do. Mortgage lending would become even cheaper for both residential and Buy to Let mortgages.
If house prices eased off this could provide a great opportunity for first time buyers to snap up some great deals and get some cheaper lending too. Their deposit wont have to be so high. But make sure you can afford the payments if interests rates go up. I always stress test my investments on 6% minimum interest rates.
Be aware the estate agents I’ve been talking to say a lot of vendors are worried about this and thus less vendors are listing their homes for sale. Which as we all know if there is less of a supply then demand increases along with price.
Remortgaging now? Or should I wait?
This depends again on two factors 1. Your risk tolerance and 2. The opportunity cost.
- If you’re not very tolerant to risk it might be best for you to fix your mortgage. Your broker can advise you on the best type in more detail.
- It’s worth factoring in the opportunity cost of waiting to decide. If you are about to come to the end of your mortgage term and you are entering your Standard Variable Rate (SVR) which is often higher than the deal you were on. You’d want to calculate the extra cost of that and times it by how long you’re prepared to wait / how long it would cost to go onto another product. Again you broker to advise you on this and maybe also your accountant.
I personally like to fix my products as this way I have peace of mind and can plan my budgets and forecasts easier.
Most importantly is that if you’re new deal is cheaper and better value (No fees) than your current one then you’re already winning.
Selling up and moving on, is now the time?
Please take careful consideration around selling up your property. If you need to move you might want to consider putting the house on the market sooner rather than later. The current uncertainty in the economy and housing marketing means that buyers might be a little more timid in purchasing something or they are looking for a better deal.
Putting the property on sooner gives you more bargaining power. The longer you wait the less power you have.
Things to think about when selling your property is how quickly do you need to sell and how much do you need to sell it for to pay off your mortgage and other loans / move to your next property.
Interest rates? What’s happening with the Bank of England base rate?
Mark Carney has hinted that the rates may come down. This will have a direct impact on the rates banks charge their customers. It’s currently at a historic low of 0.5% and has been since 2009.
It’s understood that in times of uncertainty and volatility rates stay low to encourage spending so these changes could continue for quite some time.
Mortgages are the tightening up?
So far for the major lenders it’s business as usual. Many lenders have not changed rates or products and are continuing to honour their current advertised offers.
Although some of the smaller lenders have. Taken a step back to gauge the market and to make sure they are operating correctly.
What’s everyone else doing? Buying, Selling or sitting still?
Its way too early to say. The data is just not in yet. But speaking with people on the front line (Mortgage Brokers) people are continuing to apply for mortgages and purchase houses. While there is a lot of changes to come from the vote to leave and BREXIT
We will just have to wait and see but for now it looks like its “Business as usual” and we will all just have to wait and see what happens
It’s really important that whatever your plans you look at your individual circumstances and consultant experts
* Please note I am not a mortgage broker or IFA. For more information it’s important to speak with an experts who can access more market data to help support your individual needs.