House prices and Brexit
How Brexit has affected house prices and the housing market
In this house prices and Brexit guide:
Includes date of Brexit
Includes house price predictions after Brexit
Includes Boris Johnson EU Brexit deal and news of latest Brexit vote
What is Brexit
Brexit refers to the UK leaving the EU. More than 17m people voted to leave in a referendum in June 2016.
The EU is an economic and political union which now has 27 countries and the UK is the first to leave.
Date of Brexit
The UK left the EU on 31st January 2020.
It’s still following EU rules and its trading relationship is the same.
This transition period ends on 31st December this year.
UK house prices after Brexit
In June 2016, the month of the EU referendum, the average UK house price was £212,887, according to the Office for National Statistics (ONS).³
That was an 8.2% rise from the year before.
The average house price in the UK is now £235,298, according to the latest figures, only a 2.2% rise since the previous year.
Are house prices going up or down where I live
While house price growth has generally been slow, the cost of property has increased in most regions of the UK year on year, according to the ONS.³
Average house prices have increased over the year to:
£251,000 in England (1.7%)
£173,000 in Wales (7.8%)
£155,000 in Scotland (3.5%)
£140,000 in Northern Ireland (4.0%)
The annual increase in England was highest in the West Midlands and North West.
The lowest was in the East of England (down 0.7%) and London (up only 0.2%).
The chart on the right shows how prices have changed since the month of the Brexit vote.
House price predictions after Brexit
There have been more than 1.3m buyer enquiries since the general election in December, up 15% compared to the same period a year ago, according to Rightmove.⁴
There’s also been a 2.3% (+£6,785) increase in the price of properties coming onto the market, the largest monthly rise the property portal has recorded at this time of year.
“These statistics seem to indicate that many buyers and sellers feel that the election result gives a window of stability,” said Miles Shipside, Rightmove director and housing market analyst.
“The housing market dislikes uncertainty, and the unsettled political outlook over the last 3 and a half years since the EU referendum caused some potential home movers to hesitate.
“There now seems to be a release of this pent up demand, which suggests we are in store for an active spring market.”
Yet house prices will remain flat this year, according to Nationwide's chief economist.⁵
“Much will continue to depend on how quickly uncertainty about the UK’s future trading relationships lifts, as well as the outlook for global growth,” said Robert Gardner last month.
“Overall, we expect the economy to continue to expand at a modest pace in 2020, with house prices remaining broadly flat over the next 12 months.”
How many people are buying and selling since the Brexit vote
There’s been a slight drop in the number of property transactions since the vote to leave, according to HMRC.⁶
From April 2015 to April 2016 1,328,510 residential properties changed hands.
There have been fewer every year since, falling to 1,189,540 in 2018/2019.
There were 109,850 transactions in December 2019, up from 109,190 the previous month.
Are fewer people looking to buy since Brexit
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.⁷
This fell to 265 in April 2019, but bounced back to 313 in December.
Mortgage rates after 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%.
The day before the UK left the EU last month, the BoE said it would keep the base interest rate at its current level, despite rumours of yet another interest rate cut.
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 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 December 2019 it was 1.45%.
The drop was even higher for five year fixed rate deals. In June 2016 the average rate was 2.54% and in December 2019 it was 1.69%.
Should I remortgage because of Brexit
Remortgaging has been attractive for homeowners for some time because of competitive rates.
In December approvals of loans secured on properties for remortgaging went up to 49,680 from 48,629 the month before.⁸
Looking at buyer habits, Brexit may be causing more people to take out a fixed rate mortgage so they have some certainty while so many things are up in the air.
Should I get a fixed rate mortgage deal after Brexit
If you want peace of mind about the cost of your mortgage with Brexit rumbling on, then a fixed rate for five years could be for you.
With a 25% deposit, a two year fixed rate mortgage typically costs 1.45% and a five year fixed rate mortgage 1.69%, BoE figures show.
“Until the UK detaches from EU it’s difficult to predict what may happen with house prices and interest rates,” said Miles Robinson, Trussle's head of mortgages.
“If the economy is slowing down then it’s likely the BoE will reduce the interest rate to boost the economy.
“Or if inflation’s going up, the BoE may increase the rate to moderate the economy.
“One thing that’s certain is that interest rates are still incredibly competitive. It’s cheaper to borrow than it has been historically, so I’d recommend that anyone coming to the end of their mortgage deal secures the best deal available.
“Act early. With many lenders you can reserve a rate up to 6 months in advance by making an application, so you’ll have peace of mind that your rate’s secured.”
The UK and the EU will continue to clash as the UK tries to get a Canada style free trade agreement.
This was an arrangement where 98% of tariffs were removed between Canada and the EU.
Boris Johnson’s EU Brexit deal
Boris Johnson is determined to get a Canada style free trade agreement as his EU Brexit deal.
He’s also mentioned the possibility of an Australia style agreement.
Either way, he would rather accept tariffs than EU law.
"We have often been told that we must choose between full access to the EU market, along with accepting its rules and courts on the Norway model, or an ambitious free trade agreement, which opens up markets and avoids the full panoply of EU regulation, on the example of Canada,” he said on 3rd February.
"We have made our choice – we want a free trade agreement, similar to Canada's but in the very unlikely event that we do not succeed, then our trade will have to be based on our existing Withdrawal Agreement with the EU.
"The choice is emphatically not 'deal or no deal'. The question is whether we agree a trading relationship with the EU comparable to Canada's – or more like Australia's.
"In either case, I have no doubt that Britain will prosper mightily."
News of latest Brexit vote
While the Bank of England (BoE) has been no fan of the Brexit vote, it’s now sounding more optimistic about the UK’s economy.
“The latest surveys of UK businesses taken after the general election suggest uncertainty has fallen,” the BoE said on 30th January.¹
“The latest data also suggest that global growth stopped slowing.
“Lower uncertainty and a gradual recovery in growth in other countries should help UK growth pick up.
“We expect inflation to stay below 2% this year.
“After that, we expect upward pressure on prices to build as the UK economy grows more quickly.”
The EY ITEM Club also said in January that the “decisive nature” of the general election result, and the resulting clarity on the first stage of Brexit, would “provide a slight boost to economic activity compared to their Autumn forecast”.²
It upgraded the GDP growth forecast to 1.2% in 2020 and 1.7% in 2021, compared to 1% and 1.5% in its previous forecast.
¹ Bank of England Monetary Policy Report - January 2020
² EY: UK economy: A bit more clarity – but still many unknowns
³ ONS: UK House Price Index: November 2019
⁴ Rightmove House Price Index January 2020
⁵ Nationwide: Modest pick-up in house price growth in January
⁶ HMRC: Monthly property transactions completed in the UK with value of £40,000 or above
⁷ NAEA Propertymark: Housing Report, December 2019
⁸ Trading Economics: United Kingdom Mortgage Approvals
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