The Brexit Effect: House Prices And Mortgage Rates (Latest Update)
18th January 2019
This article was last updated on 15th Feb 2019. We’ll continue to update it on a regular basis.
The clock’s ticking on the UK’s membership of the European Union. Following the 2016 EU Referendum result, the UK’s due to leave the group on 29th March 2019.
But despite our exit being so close, we still don’t have a clear idea of how our relationship with our European cousins will look post-Brexit Day.
While Brexit hasn’t been the sole driver of housing market activity since the vote, it has undoubtedly played a significant role.
So let’s take a look at what’s happened to the housing market since the vote, from changes in house prices to shifting interest rates on mortgages.
House prices have continued to rise since the vote to leave, though the pace of house price growth has dropped sharply.
Property transactions have remained largely the same, though they’re down significantly on the peak seen a decade ago.
Demand is down slightly since 2016 as buyers are increasingly cautious about proceeding with a property purchase.
Mortgage rates have fallen on average for both two- and five-year fixed rate deals, despite the Bank of England’s interest rate having risen since the vote.
How has Brexit affected house prices?
House prices have continued to rise since the vote to leave.
According to data from the Office for National Statistics (ONS), the the average UK house was worth £213,000 in June 2016, at the time of the vote.
By comparison, the typical property was worth £231,000 in December 2018 (the most recent figure).
That’s an £18,000 increase in less than three years.
However, the rate at which house prices are rising has dropped sharply.
Annual house price growth in the 12 months to June 2016 stood at 8.20%, but since then it’s been on a downward trajectory, hitting just 2.50% in the year to December 2018, according to the ONS.
That’s the lowest annual house price growth figure since July 2013, with England seeing the lowest rate of annual house price growth at 2.30%.
The regional outlook
The ONS also publishes data on how the typical house price varies by region.
The data shows that while some areas have seen very slow growth since the Brexit vote, other areas have seen prices continue to rise at a rapid pace.
The table below shows how the average house price in each region has changed since June 2016, the month of the referendum.
London’s housing market has grown particularly slowly since the Brexit vote, with house prices in the capital barely up on where they stood more than two years ago.
International buyers have long seen London as an attractive city to invest in property, but this appeal seems to have been dented by the uncertainty over how non-UK residents will be handled after we leave the EU.
The government’s announcement that it intends to increase the stamp duty charged when a property is purchased by an overseas buyer is only likely to reduce the allure of the capital further.
Will house prices go down after Brexit?
What happens next really depends on whether there’s any sort of deal struck with the EU.
Analysts at EY Item Club predict that if the UK leaves the EU with a deal in place, then house prices are likely to rise by 2% over 2019. However, in the event of no-deal, then it predicts house prices will fall by around 5% over the year.
Savills have suggested prices will rise 1.50% over the year.
The Royal Institution of Chartered Surveyors (RICS) has predicted a 1% rise.
Property portal Rightmove has forecast prices will remain flat.
Have property sales gone up or down since the Brexit vote?
There hasn’t been a huge change in the number of property sales actually taking place since the vote.
It’s worth noting however, that transaction levels overall are still significantly down on the numbers seen before the financial crash in 2007/8.
The numbers below show the average properties sold each year since 2006, based on data from HM Revenue & Customs.
2006 - 1,668,470
2007 - 1,618,880
2008 - 916,920
2009 - 847,540
2010 - 883,700
2011 - 882,870
2012 - 931,330
2013 - 1,067,300
2014 - 1,222,890
2015 - 1,225,850
2016 - 1,232,880
2017 - 1,223,410
2018 - 1,192,890
Has demand for properties changed since the Brexit vote?
The number of people actively looking to buy a new home is down slightly since the 2016 referendum.
NAEA Propertymark, the trade group for estate agents, described 2018 as a “difficult” year for both sales and lettings alike, and there’s no doubt Brexit has been a big factor here.
For example, demand has fallen year-on-year, with an average of 324 prospective house buyers registered per estate agency branch in 2018, down from 366 in 2017, according to NAEA data.
By comparison, there were 330 prospective buyers registered with each branch at the time of the vote in June 2016.
It’s worth noting that some believe the Brexit uncertainty is causing would-be buyers to hold off from going ahead with a purchase.
For example, research from mortgage lender OneFamily suggested that as many as half of prospective first-time buyers who have a deposit in place and are ready to go, are specifically delaying purchasing until there’s more clarity about what will happen after the end of March.
It doesn’t help that would-be buyers have far fewer properties to choose from either.
While the number of properties available to buy per branch increased slightly last year from 38 to 39 on average, this is down from 89 per branch back in 2008, according to the NAEA.
If demand is falling, why aren’t house prices falling too?
Supply and demand are big drivers of house prices. So if demand from buyers has taken a bit of a hit since the Brexit vote, shouldn’t house prices be falling too?
Buyers are limited by the number of properties they have to choose from. And while the number of homes available to buy per agency branch did increase slightly from 38 to 39 last year, it’s still much lower than the 89 seen back in 2008, according to the NAEA.
Along similar lines, the number of new property listings has fallen to the lowest level seen since July 2016, according to the Royal Institution of Chartered Surveyors.
There’s a historical element to this too. For decades, the rate at which new homes are built has been too slow to meet growing demand. So while a small drop in demand might slow the pace of house price growth, it may not be enough to cause them to fall.
A 2016 report from the House of Lords Economic Affairs select committee suggested that the UK would need to build 300,000 new homes each year in order to meet demand sufficiently to have a “moderating effect” on house prices.
However, we’re still some way off that target. According to data from the Ministry of Housing, Communities and Local Government, housing completions in the first half of 2018 - the most recent figures - came to just 101,730. If that rate was carried on for the second half of the year, the UK would still be left with a shortfall of around 100,000 homes.
Should you buy a house before or after Brexit?
If you’re looking to buy a property for the long-term - and you’re able to find the right home to meet your needs - then the UK’s status inside or outside of Europe won’t make a huge difference to you.
In fact, given the number of buyers who are adopting a ‘wait and see’ approach, you may find that you have less competition to buy a new home.
Have mortgage rates been impacted by Brexit?
Mortgage rates have, on average, decreased slightly since the Brexit vote.
In a bid to keep the economy moving, The Bank of England (BofE) opted to cut the bank rate (the interest rate the BofE pays to commercial banks that hold money with them) to a new record low of 0.25% soon after the Brexit vote in August 2016.
Since then, we’ve seen two subsequent increases to bring it up to the current 0.75% rate.
This is important to note, because mortgage lenders tend to adjust their own interest rates in a similar direction - when the BofE’s rate goes up, lenders’ rates typically increase by roughly the same amount. This increases many people’s mortgage payments.
But despite this, average mortgage rates have actually fallen over the last couple of years. Moneyfacts told us that the average two-year fixed rate in 2016 sat at 2.56%. That’s now dropped to 2.52%.
The movement has been even more significant on five-year deals, where the average rate has fallen over the same time period from 3.27% to 2.94%.
Has Brexit influenced the type of mortgage borrowers want?
Remortgaging hit its highest level in a decade at the tail end of 2018, according to data from banking trade body UK Finance.
This may be in some part down to the uncertainty of Brexit; as borrowers come to the end of their deals and see the potential for a turbulent time after we leave the EU, it makes sense to secure a low rate while it’s available.
However, Brexit may also be affecting the type of mortgage borrowers are going for.
Data from Moneyfacts reveals a sharp rise in the number of ten-year fixed rate deals on the market, suggesting borrowers are keen to lock in to an affordable rate for the long-term.
Moneyfacts confirmed that the number of ten-year fixed rate deals on the market had jumped from 16 in January 2014 to 150 in January 2019.
And it’s not just the availability of longer-term deals that’s notable, but the sharp fall in rates charged on these deals - from an average of 4.61% to 3.05% over the same period.
Should you remortgage before or after Brexit?
Mortgage rates remain incredibly low by historical standards. If you want to protect yourself against Brexit uncertainty by setting in stone what you’ll be paying each month, then it may be worth considering a fixed rate deal.
Our own Mortgage Expert Dilpreet Bhagrath says “It’s good to see lenders responding to concerns over Brexit by offering competitive deals for customers. I’d recommend anyone approaching the end of their mortgage deal to contact a broker now to ensure they secure the most competitive deal available to them.”
“Waiting around for lenders to reduce their rates further is a risky strategy as their rates could in fact go up - we simply don’t know what’s going to happen. You’re minimising the risks of losing out by acting earlier.”
Moneyfacts pointed out that the competition within the market has pushed rates down but with lenders enjoying such slim margins, deals are unlikely to fall much lower, particularly with at least one interest rate rise expected this year.