Will Mortgages Be Affected by Brexit: Information about Leaving the EU

Whichever way you voted in the referendum on whether to stay or leave the European Union, you are probably aware of the current situation. There is ongoing uncertainty surrounding the task of thrashing out a deal with the EU. One minute we seem to be close to a deal, the next… everything seems far more precarious.

It is sensible, then, for many people to have questions about Brexit and its possible effects on the home loan and housing markets. We try to answer some of these questions here.

Will mortgage rates go up after Brexit?
Numerous events contribute to whether interest rates go up or down. The Bank of England regularly meets to determine whether the current rate should stay as it is, or whether it should rise or fall.

Interest rates are still at historic lows, despite the rise seen in August 2018. This puts those with home loans in a good position to keep their repayments affordable. Reports from the Bank of England have suggested any future rises are likely to be gradual in nature. They also suggested, when last raising the rate, that other changes will be limited rather than severe.

Even if we secure a deal when leaving the EU, there is no way to determine the likely effect this could have on mortgage rates. The best advice is to make sure you are on a good fixed-rate deal now and to wait and see what happens.

Which mortgage companies lend the most – and will this change after Brexit?
All lenders must abide by strict affordability rules when assessing how much they can lend to each applicant. In general, big names such as Barclays, Halifax, Lloyds, and Nationwide regularly appear at the top of lists dealing with the most generous lenders.

However, this is only part of the equation. You must consider your own circumstances and how much you can afford to borrow. This will depend on whether you are applying as a single applicant or a joint applicant, in which case your joint income will be considered.

If you are ready to apply for a mortgage, make sure you do some research into the current deals on the market. There are lots of online calculators you can use – free of charge – to get an idea of how much each lender would be happy to provide as a loan. These can help you figure out which mortgage companies lend the most.

Of course, once you add Brexit into the mix, it is impossible to say what might happen. This uncertainty was always going to occur and is a key part of the process. Hopefully, once a deal is done, we will see how the market will be affected. Assuming the affordability rules are unlikely to change, we may see little difference in how much you could borrow now or in the months and years to come.

Are mortgage rates set to rise if we exit without a deal?
According to the Governor of the Bank of England, Mark Carney, the answer is almost certainly yes. However, previous comments by Mr Carney appeared to suggest the opposite might happen, with a rate cut set by the Bank to support the markets if we exited without a deal.

Some believe a no-deal Brexit could be the best thing for Britain, as it would allow us to plan our future rather than being tied to certain agreements with the EU. The truth is no one knows what will happen.

Some have said first-time buyers may well benefit from a no-deal Brexit. If house prices fall, they will become more affordable than they have been in years. Could that be the preferable situation to be in? For some, yes, but others will lose value on their homes and may decide not to sell until prices stabilise again.

Watch and wait seems to be the only sure way of finding out what happens to mortgage rates after we leave.

Brexit Flag

Will mortgage rates go down if we do succeed in securing a deal with the EU?
Again, this is uncertain. It would appear the reaction to leaving is the key element here. Will the markets respond positively to a deal, regardless of whether that deal is good or bad? Will they accept a bad deal over no deal at all?

Based on the comments from the Governor of the Bank of England, things could go either way.

Where will mortgage rates be in 5 years?
There can’t be many people who don’t want to know the answer to this one. While experts can try and predict the possible future path of interest rates, they don’t always get it right. For example, some might predict a rise in rates, yet their estimates may prove to be far from the reality. The converse is also true if a fall in interest rates is predicted. No one can be certain of where rates might go in the future, much less when the uncertainty of leaving the EU is factored into the equation.

I have a mortgage but want to move – is it best to wait until Brexit is concluded?
We’ve heard of similar scenarios involving homebuyers all over the country. While some people are putting their properties on the market and completing moves, others are more hesitant. This is more likely to be the case if a big move is on the cards.

While many predicted a house price fall following the vote in 2016, this didn’t happen. The result led to some re-evaluating their position, before everything appeared to continue as normal.

However, with the proposed date for leaving the EU fast approaching, there is a sense that many are adopting the ‘watch and wait’ approach to moving home. Clearly, anyone who wishes to move will want to get the best price for their property. This is easier to do if you are entering a buoyant housing market with lots of people looking to move. Yet with many people hanging back and waiting to see how Brexit might happen, there is a great deal of uncertainty around. It’s a buyer’s market, yet many do not want to move until the terms of the deal are known.

In the run-up to Brexit, London and the South-East have seen a dip in house prices. To be expected, perhaps, yet on the whole house prices have risen in 2018, by around 3%. Indeed, London was the only part of the UK to see a dip in house prices for the year thus far.

It makes sense London would see such a fall, since properties are most expensive there. Few would want to make such a huge commitment without knowing the potential fallout that could occur once Brexit is complete.

In short, no one knows what will happen in the next few months. Hence why so many people are waiting to find out the answers before moving or taking on a home loan. It might be the smartest way forward at present.

Published on 24 January 2020

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