House prices, mortgage rates and Brexit

How Brexit has affected house prices, mortgages and the housing market

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. Any savings will vary depending on personal circumstances.
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What is Brexit

Brexit refers to the UK leaving the EU. More than 17 million 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 31 January 2020.

It’s still following EU rules and its trading relationship is the same.

This transition period is due to end on 31 December 2020.

Brexit news

Boris Johnson has stated there is no reason why the outline of a Brexit deal cannot be sealed by the end of July.¹

He made the statement during a video summit with EU leaders in mid-June.

The EU leaders agreed to try and find early common ground on trade and security. This was to “ avoid unnecessary economic chaos next year”.

There were still differences remain between the two sides about:

  • a free trade agreement

  • fisheries

  • police cooperation

  • governance of the future agreement

There is also increased optimism that they can compromise over the UK's commitment to the European Convention of Human Rights. The two sides are getting closer to an agreement that will make it easier to extradite criminals and catch terrorists after the transition period.

house prices graph

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).² 

That was an 8.2% rise from the year before.

The average house price in the UK is now £231,855, according to the latest ONS figures from March 2020.

That’s a 2.09% increase over the last 12 months.

The ONS normally produces a House Price Index (HPI) each month. It has suspended publication of the index due to the coronavirus. 

The pandemic has led to fewer housing transactions. This makes it more difficult to give an accurate measure of UK house prices.

regional UK house price growth graph

Are house prices going up or down where I live

Average house prices have increased over the last 12 months to:

  • £248,271 in England (2.18%)

  • £161,684 in Wales (1.11%)

  • £151,856 in Scotland (2.16%)

  • £140,580 in Northern Ireland (3.80%)

House price growth has generally slowed over the last 3 years.

Learn more in our house price guide.

House price predictions after Brexit

The possibility of a no deal Brexit and the economic effects of coronavirus could cause house prices to drop.

No one knows how much house prices will fall.

These are just some of the predictions:

  • Knight Frank – 7%

  • Centre for Economics and Business Research – 13%

  • Lloyds Banking Group - 30.2% over the next 3 years

  • Deutsche Bank – 23% ³

  • Savills – 7.5%

  • EY Item Club – 5% ⁴

  • Nationwide – 13.8% ⁵

Nationwide noted that house price falls could be due to coronavirus, not just Brexit.

It said: “Housing market activity has slowed sharply as a result of the measures implemented to control the spread of the virus. 

Indeed, data from HMRC showed that residential property transactions were down 53% in April compared with the same month in 2019.” ⁶

Less demand

Supply and demand often drive house prices. The market is open again following almost 2 months of lockdown. Now the pent up demand that saw UK prices rise in January could be even higher.

Some of the demand is likely to drop as many people’s financial circumstances change.

Some buyers have already pulled out of their purchases.

Significant recession forecast

The Bank of England is predicting that coronavirus will push the UK economy into its deepest recession in 300 years.⁷

So it’s unlikely that buyers will be happy to pay pre lockdown prices.

Buyer’s market

There may be a brief window of opportunity for a bargain. This is because some people will still need to sell due to death, divorce and debt.

Lenders are now offering certain mortgages that they'd withdrawn during lockdown again.

Learn more about coronavirus and house prices.

transactions graph

How many people are buying and selling since the Brexit vote

There’s been a drop in the number of property transactions since the vote to leave, according to HMRC.⁸

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

This fell to 1,189,540 in 2018/2019.

Transactions stood at 46,230 in May 2020, compared to 97,050 in May 2019. But 25% higher than April 2020 (37,000 transactions).

The drop is probably due to the restrictions during lockdown.

housing demand may 20

Are fewer people looking to buy since Brexit

The number of potential buyers has risen a bit 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.⁹

Numbers rose to 344 in May 2020 from 322 in February.

Bank of England interest rate graph

Mortgage rates after Brexit

To try and keep the economy moving, the Bank of England cut the interest rate. They cut it to a new record low of 0.25% in August 2016, soon after the Brexit vote.

Since then, there have been two more increases, bringing it up to 0.75%.

They cut the interest rate to 0.25% and then to 0.1% in March 2020. This was an emergency move to control the economic shock of the coronavirus outbreak.

This took the cost of borrowing back to its lowest level ever.

The rate of 0.1% has stayed the same since March 2020.

Fixed mortgage rates have gone down since the vote, according to the Bank of England. 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 May 2020 it was 1.42%.

The drop was even bigger for five year fixed rate deals. In June 2016 the average rate was 2.54% and in May 2020 it was 1.7%.

Should I remortgage because of Brexit

Remortgaging has been attractive for homeowners for some time because of competitive rates. 

Looking at buyer habits, Brexit may have been causing more people to take out a fixed rate mortgage. This is so they have some certainty while so many things are up in the air.

Approvals of loans secured on properties for remortgaging fell to 34,357 in April. This dropped from 42,134 in March, and 53,061 in February.¹⁰

This is likely due to restrictions in the mortgage market. It's likely caused by coronavirus, rather than Brexit.

Should I get a fixed rate mortgage deal after Brexit

You may want to know how much you'll be paying for your mortgage due to economic uncertainty. If this is the case, a fixed rate for 5 years could be good for you.

With a 25% deposit, a 2 year fixed rate mortgage often costs 1.42%. A 5 year fixed rate mortgage costs 1.7%, Bank of England figures show. 

“During this period of uncertainty it's very difficult to predict what may happen with house prices and interest rates,” said Miles Robinson, Trussle's head of mortgages.

“The BoE have already reduced the base rate in order to boost the economy during this period.

“It’s still a great time to reserve a fixed rate for security of payments and certainty.

“Act early as with many lenders you can reserve a rate for up to 6 months in advance by making an application.

“You'll then have peace of mind you have a rate secured.”

All mortgage guides, calculators and deals

Sources

¹ Guardian: Boris Johnson: outline of Brexit deal should be 'done by July' – video

² ONS: UK House Price Index: March 2020

³ Telegraph: Will house prices fall after lockdown, and what has to happen for a worst case 30pc market crash? 

⁴ EY: UK housing market’s largely decent start to 2020 ended by coronavirus – EY ITEM Club comments

⁵ This is Money: House prices may fall 14% this year, says Nationwide, as recession hits and people stall on moving after lockdown

⁶ Property Reporter: Full impact of lockdown on housing market revealed in Nationwide's latest HPI

⁷ Financial Times: BoE warns UK set to enter worst recession for 300 years

⁸ HMRC: Monthly property transactions completed in the UK with value of £40,000 or above

⁹ NAEA Propertymark: Housing Report, February 2020

¹⁰ Trading Economics: United Kingdom Mortgage Approvals 2020 data

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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.

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