How will Brexit affect house prices and mortgages? (Updated)

28th November 2019

The Brexit Effect House Prices And Mortgage Rates

The Brexit vote of 23rd June 2016 has seen off two Prime Ministers, with David Cameron leaving office one month afterwards and Theresa May stepping down in July 2019. Boris Johnson is the latest man at the helm.

The UK was to leave the EU on 29th March this year. Having sailed past the initial extension to 12th April, the UK was due to leave by 31st October 2019.

Mr Johnson has now officially accepted the EU's offer of another extension to 31st January 2020, despite his “do or die” pledge to leave with or without a deal at the end of October 2019.

The UK’s Brexit policy will be shaped by whichever party is elected in the general election on 12th December 2019.

If you’re wondering when’s the best time to buy a house, or thinking of moving home or comparing mortgages, now’s not the time to stick your head in the sand until February next year, hoping that the clouds will then part.

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

Latest house price news:

  • Since the UK voted to leave, the rate of house price growth has generally slowed.

  • However, people tend to overestimate the impact of Brexit on house prices, according to a survey from property buyer Good Move.

  • Annual growth was 8.2% in June 2016, but stands at 1.3% as of September 2019, Office for National Statistics (ONS) figures show.

  • Between June 2016 and September 2019 house prices increased by 9.6%.

  • The average UK property price is £234,370, up from £212,887 in June 2016.

  • There’s been a slight drop in the number of transactions since the vote to leave, according to HM Revenue & Customs (HMRC).

  • Fewer people want to buy than in 2016, according to NAEA Propertymark, the trade group for estate agents.

Mortgage rates have fallen on average for both two-year and five-year fixed-rate deals (75% LTV) since the vote, according to the Bank of England (BoE).

Has Brexit had an impact on house prices?

house prices graph Sept 2019

House prices increased by 1.3% in September 2019 year-on-year (the latest figure available). While this may seem moderate, they’ve fallen from 2.9% in September 2018 and 4.6% in September 2017, ONS figures show.

House prices rose by 8.2% in the 12 months to June 2016, the month of the EU referendum. But the rate of growth has tailed off since then. Prices have risen by 9.6% in just over three years between June 2016 to September 2019.

The average price of UK property is £234,370 according to the latest figures. That’s up from £212,887 in June 2016.

Are house prices going up or down where I live?

For all the talk of a Brexit slowdown, in most of the lower priced regions of the UK the cost of property has increased year-on-year.

Government data shows that, as of September 2019, there were annual price rises of 4.0% in Northern Ireland (in Q3 2019), 2.8% in the North West, 2.6% in Wales, 2.4% in Scotland, and 2.2% in Yorkshire and The Humber.

However, there were yearly falls of 0.4% in London and 0.2% in the East of England.

Looking at the monthly data, there’s a sign that the continued Brexit uncertainty, along with the impact of the forthcoming December general election, may be affecting the market.

Between July and August 2019 house prices rose month-on-month in every region other than London. But between August and September 2019 prices fell by 2.8% in Wales, 0.4% in the East of England, and 0.4% in the West Midlands.

Here's how prices have changed since the month of the Brexit vote…

regional house price growth graph September 2019

“The Brexit ball and chain continues to weigh on the property market, but it hasn’t dragged it to the bottom as many predicted,” said Andrew Montlake, managing director of London mortgage broker Coreco.

“London, once again, is at the bottom of the annual price table as it pays for its obscene growth earlier in the current decade.

“Extremely low borrowing costs and cheaper prices continue to drive sales while a strong jobs market and ever-falling inflation are giving people confidence amid the chaos.

“Transaction levels are hardly booming but there is still activity as people take advantage of the buyers’ market and lock into ultra-competitive fixed rates for peace of mind.

“All eyes for now are on the December general election.

"When we all wake up, somewhat ominously on Friday 13th December, we will know a lot more about the likely direction of the property market in 2020 and beyond.”

General election 2019

Clearly the general election will have a big impact on the UK’s future Brexit policy.

If the Conservatives win convincingly, the party will try and push through Boris Johnson’s Brexit deal before the latest deadline of 31st January.

If Labour is elected, the party would attempt to renegotiate Brexit and give the public a choice between accepting the deal or remaining in the EU. It said it would do this within six months.

If the Liberal Democrats win they’ll cancel Brexit, or back another referendum if in a coalition with the Government.

At the time of writing the Conservatives had a clear lead in the opinion polls.

House price predictions after Brexit

With house prices falling in some areas, 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 – in times of uncertainty you’ve got scope to haggle for a better price.

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

If you’re worried about house prices falling because of Brexit, one positive is that the prospect of a ‘no-deal’ looks more unlikely after Boris Johnson agreed a deal with the EU on 17th October 2019.

The Bank of England’s Monetary Policy Committee now expects there to be a “deep free trade agreement” between the UK and EU.

Before that, credit rating agency Standard & Poor’s predicted a 10.2% fall in house prices in 2020 if the UK left without a deal.

Here are some of the latest housing market predictions:

  • A Reuters poll of 27 ‘property market specialists’ predicted house price growth of 1.0% in 2019, 1.5% in 2020 and 2.3% in 2021. Most economists expect the UK to eventually strike a free trade deal with the EU, according to another Reuters poll. (link)

  • Savills, the global real estate provider, expects average house prices to rise by 1% in 2020, 4.5% in 2021 and 3.0% in 2022, 2023 and 2024. (link)

  • PWC, the multinational professional services company, says house prices will pick up from 2020 onwards if an orderly Brexit is delivered (link)

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

property transactions graph October 2019

There’s been a slight drop in the number of property transactions since the vote to leave.

From April 2015 to April 2016 1,328,510 residential properties changed hands.

There’s been fewer every year since, falling to 1,189,540 in 2018/2019, according to HMRC.

There were 113,610 transactions in October 2019, up from 99,290 the previous month.

Are fewer people buying since Brexit?

housing demand graph September 2019

While the number of potential buyers has dropped slightly since the vote to leave, there are signs that demand is coming back.

There were on average 330 people per estate agency branch actively looking to buy a new home, in June 2016, according to NAEA Propertymark.

This fell to 265 in April 2019, but bounced back to 387 in September.

Despite these steady figures, the delay to Brexit has forced almost half (47%) of prospective first-time buyers to alter their plans when it comes to purchasing their own property, research from mortgage lender Aldermore has found, so some people are holding back.

Why house prices have stayed robust

If some potential buyers are delaying buying property due to 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 37,220 new-build completions between April and June 2019 in England, a 2% decrease from the previous quarter, and 8% less than the same quarter a year ago.

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 won’t necessarily 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.

In fact, given the number of buyers who seem to be adopting a ‘wait and see’ approach, you may have less competition when buying a new home.

How will Brexit affect mortgages?

BoE interest rate Nov

To try and keep the economy moving, the BoE cut the Bank Rate (the interest rate the BoE 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%.

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

Fixed-mortgage rates, however, have gone down since the vote, according to the BoE. If you put down a 25% deposit on a home in June 2016, the average rate you’d pay for a two-year fixed-rate mortgage was 1.75%. In October 2019 it was 1.55%.

The drop was even higher for five-year fixed-rate deals. In June 2016 the average rate was 2.54% and in October 2019 it was 1.74%.

Should I change my mortgage because of Brexit?

To try and keep the economy moving, the BoE cut the Bank Rate (the interest rate the BoE 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%.

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

Fixed-mortgage rates, however, have gone down since the vote, according to the BoE. If you put down a 25% deposit on a home in June 2016, the average rate you’d pay for a two-year fixed-rate mortgage was 1.75%. In October 2019 it was 1.55%.

The drop was even higher for five-year fixed-rate deals. In June 2016 the average rate was 2.54% and in October 2019 it was 1.74%.

Should I change my mortgage because of Brexit?

Remortgaging has been strong for some time. In September 2019 remortgages with additional borrowing increased by 5.9% compared to September 2018, and remortgages with no additional borrowing increased by 8% in the same period, according to 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.

Rates have fallen in the past few years, and that trend has continued in 2019. Average 10-year fixed rates reached 2.91% in November, down from 3.0% in May.

Should I get a fixed-rate deal? And for how long?

If you want peace of mind regarding the cost of your mortgage with Brexit chaos rumbling on, then a fixed rate for five or 10 years could be for you.

With a 25% deposit, a two-year fixed-rate mortgage typically costs 1.55% and a five-year fixed-rate mortgage 1.74%, BoE figures show. And while this doesn’t take into consideration the cost of fees, both are comparatively low rates.

Not that you necessarily need to fix for the long term due to Brexit, however.

In the event of the UK having a troubled exit from the EU, like a ‘no-deal Brexit’, the BoE may cut the interest rate from 0.75% to give a boost to the economy – which could see mortgage rates remain low when you come to remortgage.

Ultimately it’s your call whether you want to gamble on rates staying low in two or three years’ time rather than five or 10.

Should I remortgage before or after Brexit?

It seems likely that mortgage rates will be competitive before and after Brexit, though fixing your rate would give you certainty. But before doing so, you should consider whether it’s worth it, especially if it would cost you in the form of Early Repayment Charges (ERCs).

Regardless of what you decide, mortgage rates are incredibly competitive by historical standards.

“It’s good to see lenders responding to concerns over Brexit by offering competitive deals for customers,” said Trussle mortgage expert Dilpreet Bhagrath.

“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.

Share this article on: Twitter, Facebook, LinkedIn

Bear in mind: Your home could be repossessed if you don't keep up repayments on your mortgage.

You may have to pay an early repayment charge to your existing lender if you remortgage.

Share this page on: Twitter Facebook

Get the right mortgage for you

And save up to £344 per month

Individual savings may vary depending on personal circumstances.