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Brexit Effect: House Prices And Mortgage Rates (Latest)

18th January 2019

The Brexit Effect House Prices And Mortgage Rates

This article was last updated on 26th March 2019. We’ll continue to update it on a regular basis.

The leave date of the UK’s departure from the EU has been extended. If MPs approve the latest deal, it will be extended until 22nd May. If they don’t, then the extension will last only until 12th April at which point the UK must leave the EU.

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 mortgage interest rates.

Latest summary:

  • House prices have continued to rise since the vote to leave, though the pace of house price growth has dropped sharply to the lowest since 2013.

  • Property transactions have remained largely the same, though they’re down significantly on the peak seen a decade ago.

  • Demand is down since 2016 as buyers are increasingly cautious about proceeding with a property purchase.

  • Mortgage rates have risen on average for both two-year and five-year fixed rate deals.

How has Brexit affected house prices?

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 average UK property was worth £213,000 in June 2016, at the time of the vote.

But when it comes to the latest house prices, the typical property was worth £228,000 in January 2019 (the most recent figure).

That’s a £15,000 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 1.70% in the year to December 2018, according to the ONS.

As a result, recent house prices are showing the lowest rate of annual growth since June 2013.

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.

Average house price by UK region 2016 to 2018

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 could reduce the allure of the capital further.

Will house prices fall after Brexit?

The question of what will happen to house prices after Brexit really depends on whether there’s any sort of deal struck with the EU.

Here are the house price predictions from a host of industry experts:

Have property sales gone up or down since the Brexit vote?

Have property sales gone up or down since the Brexit vote

There hasn’t been a huge change in the number of property transactions actually taking place since the vote.

Data from HM Revenue & Customs (HMRC) shows that in February there were 84,010 residential property transactions, up by 2.80% on the same point last year, and slightly below average typical transaction numbers over the last year.

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 HMRC.

  • 2006 - 1,444,120

  • 2007 - 1,702,710

  • 2008 - 1,492,810

  • 2009 - 796,060

  • 2010 - 896,980

  • 2011 - 878,720

  • 2012 - 920,960

  • 2013 - 928,350

  • 2014 - 1,133,820

  • 2015 - 1,201,740

  • 2016 - 1,328,510

  • 2017 - 1,158,330

  • 2018 - 1,208,010

Has demand for properties changed since the Brexit vote?

Has demand for properties changed since the Brexit vote

The number of people actively looking to buy a new home has dropped since the 2016 referendum.

NAEA Propertymark, the trade group for estate agents, says that in January the number of prospective house buyers registered per agency branch dropped down to 297 on average, compared to 304 in December.

By comparison, there were 330 prospective buyers registered with each branch at the time of the vote in June 2016.

It doesn’t help that would-be buyers have far fewer properties to choose from either.

The number of properties available to buy per branch is down at just 36 on average according to the NAEA, down from an average of 39 in 2018 and 89 per branch back in 2008.

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.

What do the experts think?

We asked some property experts what impact they believe Brexit has had on house prices and the demand for property across the UK.

Richard Beresford, chief executive of the builders’ trade body the National Federation of Builders, says that demand for homes under £400,000 “remains strong” but admitted that sales for larger homes above £600,000 have weakened.

“The speed at which new homes are sold has slowed, with buyers appearing more cautious. However, homes are still selling, with Help To Buy remaining a popular lending mechanism,” he added.

Sam Mitchell, chief executive officer of online estate agent Housesimple, said that it’s important to acknowledge how different the impact of Brexit is on a regional basis.

"Brexit uncertainty has been a drag on property prices in London and commuter belt towns, where issues around affordability were already applying the brakes to house prices which have raced ahead over the past few years and out of reach of many.

"However, that's not the case in areas such as the North West and Yorkshire, where local property markets are thriving and transaction levels are healthy, and the Brexit effect has been less apparent,” he concluded.

Miles Shipside, director at Rightmove, said that the closer we get to the wire without an agreement in place, the more likely buyers are to wait and see.

He added: “Markets and people don’t like uncertainty, though while sales agreed numbers are down by 7%, that means they’re still running at 93% of last year’s levels. Most potential buyers are getting on with their lives or seeing a price lull as an opportunity to get onto the housing ladder or move to the next rung, with average national asking prices being 0.80% cheaper than a year ago.”

Should you buy a house before or after Brexit?

If you’re looking to buy a property for the long-term, the UK’s status inside or outside of Europe likely won’t make a huge difference.

The key is finding a property that meets your needs - not just for today, but for the future too. So long as you can afford the monthly repayments now and in the future (should rates rise), then that’s all that really matters.

Whether we have a free trade agreement with Finland or adopt a Norway-plus arrangement with our European cousins is probably going to be of little concern.

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 interest rates been impacted by Brexit?

Have mortgage rates been impacted by Brexit

Mortgage rates have, on average, increased since the Brexit vote according to our own data.

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 monthly mortgage payments.

Our data shows that rates have turned upwards since the vote. Back in July 2016, the median rate on a two-year fixed rate mortgage sat at 2.19%. But today that has jumped up to 3.30%.

It’s a similar story on five-year fixed rate deals, where the median rate has risen from 2.89% to 3.95% over the same period.

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 look in 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 wait until 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.

Trussle 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. 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.

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