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How is Brexit impacting the housing market?


Since taking office at the end of July, Boris Johnson’s primary task has been tackling the issue that has gripped parliament for the last three years – Brexit.

Mr Johnson vowed that October 31 was the day the UK would leave the EU, come what may. Yet with the prime minister’s government being defeated on the recent ‘No-Deal Brexit’ law, meaning the UK cannot leave the EU without a deal, and the threat of the general election looming, the prime minister’s plans may have been thwarted.

With this uncertainty, how has the housing marketing reacted to this most turbulent of times in the country’s political history? We’ve looked at what could potentially happen to mortgages during this era of uncertainty.

The state of the current market

In the latest House Price Index from the UK's biggest lender Halifax, house prices are rising, but the increases remain subdued compared to previous times.

In its August report, Halifax revealed that there had been a 0.3 per cent month-on-month increase in the average price of a house, rising from £232,876 in July 2019 to £233,541. There was a slightly 0.1 per cent increase when June-August was compared to the previous quarter (March-May), whilst year-on-year saw the biggest rise, up 1.8 per cent compared to August 2018. Although some may have concerns about what will happen to house prices after Brexit, the current trends are showcasing increases – albeit very steady – in the build up to the UK leaving the EU.

Russell Galley, managing director at Halifax, commented on the findings saying: ““Although the housing market will undoubtedly be influenced by events in the wider economy, it continues to show a degree of resilience for the time being. We should also not lose sight of the fact that the single biggest driver of both prices and activity over the longer-term remains the dearth of available properties to meet demand from buyers.”

How is Brexit affecting mortgages?

According to recent figures, a massive £24.1 billion of mortgages are set to come to an end in October – a time period when the UK could be preparing to leave the EU on October 31.

However, the current political uncertainty within the UK could benefit those looking to secure a new mortgage, as the gap between a two-year and five-year mortgage has shrunk due to the fear behind a No Deal Brexit. This gap has been getting smaller ever since the EU referendum took place in 2016.

Since the initial referendum, the mortgage rates for two-year deals has increased on average very slightly from 2.48 per cent to 2.49 per cent, whereas the rates for a five-year mortgage has decreased, falling form 3.08 per cent to 2.79 per cent – at its lowest, the five-year mortgage rates dropped to 2.76 per cent in October 2017.

With reports that the five-year mortgage rates are set to fall even more in the coming weeks, it offers the perfect opportunity for buyers to secure a long-term fixed mortgage at a very attractive rate – some experts are going as far as saying borrowers can secure the “best deal ever” by opting for a five-year fixed mortgage in the near future. Current mortgage rates are showing good signs for homebuyers.

Avant Homes group development director, Rob Slocombe, believes that with the current mortgage rates, there may be no better time to purchase a new home: “In a period of political uncertainty in the UK, it would appear opting for a long-term fixed mortgage makes buying a new home a stable decision.

“The excellent rates customers are now being offered on two, three and five-year fixed mortgage deals provides certainty and, of course, piece of mind on monthly mortgage outgoings in the future, whatever the outcome of Brexit.”

Can first-time buyers get on the property ladder?

The pre-Brexit housing market is also seeing a move towards “bumper mortgages”, thanks to high property prices, smaller deposits and low mortgage rates – something which can benefit those looking to make their first move onto the housing ladder.

Currently, one in every 20 mortgages sees the borrower lend between 90-95 per cent of the property value, meaning buyers are now putting a 5-10 per cent deposit down which, according to the Bank of England, is at its highest proportional rate since mid-2008 at the start of the financial crisis. Six in 10 borrowers also have a deposit of more than 25 per cent of the home’s value.

Rob added: “Borrowers can purchase a new home with a much smaller deposit when partnered with the Help to Buy scheme. It can make buying a home much more financially accessible for first-time buyers rather than paying excessive monthly rental charges. It makes perfect sense!”