A no-deal Brexit seems to be becoming ever more likely. The Prime Minister has said that he is prepared to do a deal – but that he is quite prepared to take the UK out without one on October 31.
The question is now whether the rest of us are as prepared as he is.
As Mortgage experts we are already looking at the potential impact on mortgages and the housing market – and find that a no-deal on Brexit could be a good deal for housebuyers.
A buyer’s market
The property market has slowed dramatically in recent months. People are wary about what the future may hold after a hard Brexit and are sitting tight rather than taking the next step up the property ladder.
This means that houses are not selling – and as the number of potential buyers falls, house prices may start to fall with them. This is not to say that the value of your home has fallen off a cliff. According to the Nationwide’s latest property price survey, annual house price growth ‘almost ground to a halt’ at 0.2% growth year on year, while prices are -0.2% month-on-month, after taking account of seasonal factors.
The prospects of a no-deal Brexit may have meant some potential purchasers abandoning their purchase if they are worried about their job security. Falls may have occurred in London, while property in regions such as the West Midlands, where lower prices were the norm, may have continued to increase in value.
The slow market could also mean that a buyer may be in a good bargaining position if they have nothing to sell.
Current Mortgage rates
But, whether or not you are thinking about a move, your biggest concern may not be the price of your home, but the cost of your mortgage. Many homeowners who stretched themselves when base rate – and consequently mortgages – were at historic lows are fearful about the effect Brexit might have on the cost of their home loans.
Here there is some good news. The outlook for mortgages is that they could stay low for a while, whether or not a deal can be agreed. Despite the increase in the Bank Rate in August last year, rates have remained highly competitive. The main reason being that the low volume of new mortgages being written is worryingly low for lenders, and they are keeping their rates down to try to secure what few buyers there are.
What about the future?
With Brexit worries, many borrowers will choose to fix their interest rates, providing the security of a constant rate and known payments for the next few years.
It might seem a shrewd decision. A no-deal Brexit could see yet more weakening in sterling on the foreign exchange markets, which would soon result in higher costs to consumers as the higher costs of imports – of everything from food to fuel – were fed through the system. This would mean higher inflation, which the Bank of England traditionally tries to stem with a rise in interest rates.
This would in turn mean an increase in mortgage rates, which would be felt immediately by those with a tracker. But is a fixed rate really the best idea?
The fact is that the Bank actually cut interest rates after the referendum, to bolster the economy. If a no-deal made the UKs short term economic outlook seem shaky for a while, they might have reason do so again.
Mortgage interest rates could go down, rather than up, if the Bank of England decides to stimulate the economy.
So, what should you do?
Hard, negotiated or postponed, Brexit will probably continue to put the brakes on house buying. However, the underlying factors that prompt house buying, such as growing families, and the continued demand for homes will not go away.
Prices may fall a little, and this could provide opportunities for some buyers to negotiate a bargain.
As for mortgages, the uncertainty makes it even more essential to get the help of an expert. At Continuum, our mortgage experts know exactly what is on the market from all the lenders – including the deals that are only available through our advisers.
There could be house buying bargains to be had, post Brexit. There could well be mortgage bargains too – if you call on us at Continuum.
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable investment strategy, you should seek independent financial advice before embarking on any course of action.
Your home may be repossessed if you do not keep up repayments on your mortgage.