House prices, mortgage rates and Brexit
How Brexit has affected house prices, mortgages and the housing market
In this house prices and Brexit guide:
Includes date of Brexit
Includes coronavirus, the economy and house prices
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).¹
That was an 8.2% rise from the year before.
The average house price in the UK is now £234,742, according to the latest figures (December 2019).
That's a rise of 2.18% over the last 12 months.
Are house prices going up or down where I live
The cost of property has increased in all regions of the UK over the last 12 months for the first time since February 2018, according to the ONS.¹
Average house prices have increased over the last 12 months to:
£251,711 in England (2.16%)
£165,735 in Wales (2.16%)
£151,603 in Scotland (2.25%)
£140,190 in Northern Ireland (2.51%)
Yorkshire and the Humber had the highest annual increase of the English regions, with prices increasing by 3.86% to £168,382.
The lowest increase was the South East of England, where prices increased by 1.22% to £325,050 over the year to December 2019.
House price growth has generally slowed over the last 3 years.
House price predictions after Brexit
The price of property coming onto the market rose by 0.8% (£2,589) in February, according to Rightmove.²
Sales were up by 12.3% nationally and 26.4% in London compared to a year ago.
A boom in buyer activity was outstripping the rise in the number of new sellers, said Miles Shipside, Rightmove director and housing market analyst.
“The average price of newly marketed property is just £40 below its all-time high from June 2018, with the typically busy spring market still to come.
“This means that spring buyers are likely to be faced with the highest average asking prices ever seen in Britain.
“Buyers who had been hesitating and waiting for the greater political certainty following the election outcome may be paying a higher price, but they can now jump into the spring market with renewed confidence.
“After three and a half years of Brexit uncertainty, dither, and delay, many now seem to have the 2020 vision that this is the year to satisfy their pent-up housing needs.”
Coronavirus, the economy and house prices
While annual house price growth has been the strongest since July 2018, Nationwide predicts that prices will remain generally flat this year.³
“Looking ahead, economic developments will remain the key driver of housing market trends and house prices,” said Robert Gardner, Nationwide's chief economist.
“Business surveys suggest that activity recovered in the New Year, but there are still significant uncertainties that threaten to exert a drag on the economy in the coming quarters.
“The global economic backdrop remains challenging, with the coronavirus outbreak expected to weigh on global activity in the coming quarters.
“Investment is likely to remain subdued until the UK’s future global trading relationships become clearer, which is unlikely until early next year.
“Overall, we expect the UK economy to continue to expand at a modest pace in 2020, with house prices remaining broadly flat in 2020 as a whole.”
The coronavirus (Covid-19) outbreak could cut global economic growth in half said the Organisation for Economic Cooperation and Development on 2nd March 2020.⁴
The Bank of England (BoE) has made two emergency interest rate cuts to try and control the economic fallout of coronavirus.
It has cut the bank rate from 0.25% to 0.1%.
Mortgage rates may drop over the next few days and weeks as lenders react to the base rate cut.
Read our coronavirus guide to learn more about how it may affect house prices and home purchases.
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.⁵
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.
Transactions rose from 78,820 in January 2019 to 88,850 in January 2020.
Are fewer people looking to buy since Brexit
The number of potential buyers has increased since the vote to leave.
There were on average 330 people per estate agency branch actively looking to buy a new home in June 2016, according to NAEA Propertymark.⁶
The number of house hunters increased in January 2020 by 22% from 313 to 382. This is the highest figure seen since September 2019 when there were 387 registered.
Mortgage rates after Brexit
To try and keep the economy moving, the BoE cut the interest rate 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 0.75%.
The BoE cut the interest rate to 0.25% and then to 0.1% in March 2020 in emergency moves to control the economic shock of the coronavirus outbreak.
This takes the cost of borrowing back to its lowest level ever.
When the BoE’s rate goes down, mortgage lenders typically lower their rates by roughly the same amount. This reduces 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 January 2020 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 January 2020 it was 1.69%.
Should I remortgage because of Brexit
Remortgaging has been attractive for homeowners for some time because of competitive rates.
In January 2020 approvals of loans secured on properties for remortgaging rose to 52,112 from 50,150 in December 2019.⁷
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."
The UK and the EU have since warned each other they’d walk away from talks on a Brexit trade deal unless the other side gave way on their red lines.
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¹ ONS: UK House Price Index: December 2019
² Rightmove House Price Index February 2020
³ Nationwide House Price Index: February 2020
⁴ Global economy faces gravest threat since the crisis as coronavirus spreads
⁵ HMRC: Monthly property transactions completed in the UK with value of £40,000 or above
⁶ NAEA Propertymark: Housing Report, January 2020
⁷ Trading Economics: United Kingdom Mortgage Approvals 2020 data
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