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How Will Brexit Affect House Prices And Mortgages? (Updated)

13th May 2019

The Brexit Effect House Prices And Mortgage Rates

The UK was due to leave the EU on 29th March this year, but our MPs have rejected the withdrawal agreement three times. Having sailed past the initial extension to 12th April, the UK is now due to leave by 31st October 2019.

But if you’re wondering when’s the best time to buy a house, thinking of moving home or comparing mortgages, now’s not the time to stick your head in the sand until Hallowe’en hoping that the clouds will have parted.

The Brexit effect on house prices may well continue for some time. And as prices continue to tumble, now could be a good time for you to buy a house.

Latest house price news:

  • House prices in the UK have been falling for the last six months.

  • The rate that prices have risen since the referendum has plummeted.

  • The number of transactions are broadly the same, though they’re down significantly from the 2007/8 peak.

  • Fewer people want to buy than in 2016.

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

Has Brexit had an impact on house prices?

How has Brexit affected house prices

House prices in the UK have fallen every month since August last year. According to the Office for National Statistics (ONS), the average UK property in February 2019 (the most recent figure available) cost £226,234. This is a drop of 2.57% since August last year.

While this is still higher than the average house price of £213,000 in June 2016 - when the UK voted to leave the EU - the rate at which house prices are rising has dropped sharply.

House prices grew by 8.2% in the 12 months up until June 2016. But in the year to February 2019 they increased by only 0.6%, down from 1.7% in the year to January 2019. This is the lowest annual rate since September 2012, when it was 0.4%.

Are house prices going up or down where I live?

While house prices have risen very little in some areas since the Brexit vote, in others they’ve shot up, according to the ONS.

The West Midlands has seen the highest growth at 13.39%, while London has seen the lowest at 1.22%.

Average house price by UK region 2016 to 2018

Sam Mitchell, chief executive officer of online estate agent Housesimple, says it’s important to take into account how Brexit looks to have affected regions differently.

"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.”

Will house prices drop after Brexit?

With house prices falling, you’re probably wondering whether now’s a good time to buy a house.

A buyer’s market is traditionally the best for first-time buyers and people who are selling a property to buy a more expensive one.

But these are no ordinary times, and you’ll need to consider whether Brexit will affect future house prices.

What happens to the property market after Brexit partly depends on whether a deal is struck with the EU.

And there seems to be as many housing market predictions as there are industry experts.

Have property transactions 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 since the vote to leave.

There were 96,300 residential property transactions in March this year, up by 0.45% on the same month last year, according to HM Revenue & Customs.

But transactions overall have dropped significantly since the financial crash of 2007/8. In 2007, an average of 1,702,710 properties were sold.

Are fewer people buying since Brexit?

Has demand for properties changed since the Brexit vote

The number of people actively looking to buy a new home now average 252 per estate agency branch. That’s almost 50% less than in 2016, according to NAEA Propertymark, the trade group for estate agents.

It doesn’t help that would-be buyers have far fewer properties to choose from. As of February 2019 there was an average of 34 registered per branch, down from 35 for the same month last year, according to the NAEA.

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.”

If demand is down so much, why aren’t house prices falling more quickly?

With so few of us looking for a new home since the Brexit vote, you’d think house prices would be falling fast as vendors tried to snap up a buyer.

But it’s not as simple as that.

Supply and demand are big drivers of house prices. For decades, the rate at which new homes are built has been too slow to meet growing demand.

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.

But we’re still way off that target. According to the Ministry of Housing, Communities and Local Government, there were about 43,000 new build completions in the December quarter 2018, a 2% increase from the previous quarter, and only 1% above their level in the same quarter a year ago. Completions are now 11% below their peak in the March quarter 2007.

When’s the best time to buy a house - before or after Brexit?

You can never truly predict what will happen to house prices. And with the current economic uncertainty, it’s even more tricky to come up with a long-term house price forecast.

But if you’re looking to buy a property for the foreseeable future, whether the UK is in or out of the EU is unlikely to make a huge difference.

The key is finding a property that meets your needs - not just for today, but also for the future. So long as you can afford the monthly repayments, and any sudden increases in your mortgage rate, 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 have less competition when buying a new home. And with house prices falling, you could find yourself a bargain.

How will Brexit affect mortgages?

Have mortgage rates been impacted by Brexit

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

To try and keep the economy moving, the Bank of England (BofE) 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% in August 2016, soon after the Brexit vote.

Since then, there have been two subsequent increases bringing it up to the current rate of 0.75%.

It’s important to note, because when the BofE’s rate goes up, mortgage lenders typically raise their rates by roughly the same amount. This increases many people’s monthly mortgage payments.

Our research shows that mortgage rates have increased since the vote. In July 2016, the median rate on a two-year fixed-rate mortgage was 2.19%. It’s since jumped to 3.30%.

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

Should I change my mortgage because of Brexit?

Remortgaging hit its highest level in a decade at the end of 2018, according to banking trade body UK Finance.

This may, in some part, be down to Brexit uncertainty. As borrowers come to the end of their deals, and see a potentially 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 choosing.

Research from Moneyfacts shows a sharp rise in the number of 10-year fixed-rate deals on the market, suggesting borrowers are keen to lock in an affordable rate for the long term.

Moneyfacts said that the number of 10-year fixed-rate deals available jumped from 16 in January 2014 to 150 in January 2019.

And it’s not just the availability of longer-term deals that’s worth noting. The rates of these deals have also fallen sharply from an average of 4.61% to 3.05% over the same period.

Should I 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.

Trussle Mortgage Expert Dilpreet Bhagrath, said: “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 mortgage broker now to make sure 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 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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