The UK Government’s 2016 referendum on leaving the EU resulted in a Yes vote from the UK public, placing the country in the middle of what has now been termed “Brexit”.
And what impact has Brexit had on the housing market and mortgages, you may well ask?
To begin with, there would appear to be a decline in the number of people choosing to move home, according to HMRC figures highlighting that house moves were 9% down in the second half of 2016 compared to one year earlier.
Given the astronomically high prices of property in London, where a boom had previously been recorded, the capital’s price growth has now been surpassed by other UK cities such as Bristol and Manchester.
Those searching for property in London could have hoped for a drop in prices as growth stayed steady at an annual rate of 5.6%. These values may remain at this rate, however, over the next two to three years.
Inflation, of course, has reared its ugly head thanks to Brexit and its impact on the declining value of sterling. Many basic costs are rising including household goods and, faced with these rising costs, many would-be house-movers will take the advice of numerous new television property shows by staying put and extending their home upwards, downwards or out into the garden rather than taking on the expense of moving to a larger home.
The good news for the mortgage market, though, is that interest rates dropped throughout 2016 and this decline has continued into 2017.
Lenders’ rates are still very competitive, mainly due to there being less borrowers which, in turn, leads to a great deal of competition.
However, interest rates did start to climb towards the end of 2016, setting a pattern that is likely to continue throughout 2017. Some lenders also withdrew special offers and some of their fixed-rate mortgage deals, in part due to the Bank of England cutting the base rate in August 2016. When costs to banks increase, it follows that so do mortgage rates.
Looking more closely at the demographics of the Brexit vote, it becomes apparent that more of the older generation voted in favour of leaving the European Union than younger cohorts.
These same older home owners tend to be sitting on considerable equity in their property and may seek to re-mortgage, either to downsize or simply to release some of that equity to enjoy in their retirement.
This will lead to re-mortgaging driving the lending market as opposed to house-buying. Fixed rate deals will be most popular as rates are unlikely to drop again in the near future, quite the opposite.
It goes without saying that the more equity held in a house, the less money a householder will need to borrow to move and thus, the better the lending rates that will be on offer to them.
As always, it is crucial to have sound financial advice before embarking down such an important route. We at Cailean Mortgages have many years of experience and will always offer the best advice tailored to your own personal situation. Don’t hesitate to call us!