Ray Boulger Answers Your Brexit Worries
Written on 18 February 2019 by
It seems that all we hear about is Brexit, yet everyone’s confused about what’s actually going on. How Brexit will affect the property market is one of the hottest topics people want to know more about.
We looked into the biggest worries people have about the property market and Brexit, then we asked our resident mortgage expert, Ray Boulger, to address your concerns and discuss what to expect.
Will Brexit Cause a House Price Crash?
There’s such a degree of uncertainty surrounding Brexit its already had a significant influence on the housing market, so a crash is unlikely.
In his previous blog, Will Brexit Uncertainty Cause a Property Market Crash? Ray stated:
Much of the Brexit impact is already factored into the market and so at this stage it is not about whether the end decision is good or bad, but whether it is better or worse than the market expects.
A lot of people are fixating on the negative impact a no deal Brexit could have on the property market, but the market isn’t sitting still waiting for a Brexit deal – it’s already affected by the uncertainty, therefore an outcome, either way, won’t be as extreme as people think.
Ray comments on this in more detail:
Although no deal Brexit would have a further modest negative impact, the more likely outcome of a deal based broadly on Theresa May’s proposal would probably initially have a mildly positive impact on sentiment.
We should avoid thinking in terms of a sudden price crash or a “good or bad” outcome but prepare for a less severe fluctuation.
Should You Wait Until After Brexit to Buy a Property?
Brexit uncertainty isn’t such a bad thing if you’re looking to buy a property. The market’s quiet. This is partly due to Brexit, but it’s by no means the sole, determining factor. We’ve seen a slight stagnation since 2014, most likely a result of SDLT (Stamp Duty Land Tax) increases. It’s leaving sellers nervous, therefore they’re more willing to accept a modest offer.
As Ray says:
If one waits until the outlook is clearer, sellers will feel less threatened and be less inclined to accept a cheeky bid.
You should use this time to drive a hard bargain as you stand a better chance of securing a lower price on a property you want now.
Will Brexit Make It More Difficult to Take Out a Mortgage?
This one may surprise you. Brexit, along with other factors, has helped make it easier rather than harder to take out a new mortgage.
But how?
Ray explains:
With more lenders planning to enter the mortgage market this year, housing transactions likely to fall and total lending expected to be flat, the increased capacity in the mortgage market – combined with little change in overall demand – is likely to result in intensified competition, both in improvements and pricing.
What does this mean? Well, first it’s important to explain that experts like Ray aren’t considering Brexit the only determining factor. They’re looking at trends in the housing market over the last few years in addition to the impact of Brexit uncertainty.
In his previous blog, Will Brexit Uncertainty Cause a Property Market Crash? Ray stated:
Brexit uncertainty is one obvious potential reason for lower transaction numbers but these numbers have been broadly flat since 2014 - that can’t be the sole, or even major, reason, although it is no doubt a contributory factor.
Brexit uncertainty has already discouraged people from buying property, so it has indeed contributed to the projected fall in housing transactions – it’s just not the only factor and therefore not a sudden issue the market’s struggling to deal with.
Now, to consider the other projected trends.
Despite the fall in housing transactions, total lending - i.e. the total value of UK lending - won’t fall or rise. There’s little change in the overall demand but more lenders competing for their share.
With less people buying properties and total lending value unlikely to increase, lenders need to try harder to entice borrowers. They need to offer better deals and be more flexible with their lending criteria in order to attract as many applicants as possible.
How Is Brexit Uncertainty Impacting Interest Rates?
Brexit will likely contribute towards keeping interest rates low for longer, which means there’ll be better deals on the market for people taking out mortgages. Furthermore, if you’ve only ever thought about a fixed rate mortgage, you may want to consider a discount or tracker rate mortgage - especially if you’re interested in the option of having no ERCs (Early Repayment Charges) - or even longer term fixed rate mortgages.
Ray states:
The likelihood that not only will the Bank Rate remain low for longer, but that the next move might not be up - as most people expect - means that a discount or tracker rate mortgage, at least 0.25% cheaper than a fixed rate and with no ERCs, can be a good alternative to a fixed rate for those who want the flexibility of having no ERCs.
The type of rate that suits you will always depend on your situation, but you may want to look outside the standard fixed rate mortgage while the Bank Rate is low.
On the other hand, you may also want to consider longer term fixed rate mortgages.
According to Ray:
Even if rates fall a little further the small difference in the cost of fixed rates for 2, 3 5 and 10 years means that the longer-term fixes, which some may not have considered seriously in the past, should not be overlooked.
Rates could fall lower but, the cost of longer term fixed rate mortgages is already pretty low, so now’s the time to score a good deal.
What’s more, if you want to benefit from the longer term fixed rates available now, but still want flexibility should you move, then you’ll want to be selective about the ERC conditions you sign up for.
Ray explains that:
ERCs are a particularly important consideration on longer term fixes and so 10 year fixes with ERCs for only 5 years are a good option, offering rate certainty for 10 years with the option to redeem ERC free as an alternative to porting in the last 5 years if moving.
This is ideal for people attracted to the current low cost of long term fixed rates, but anxious about being tied in for longer period.
How Will Brexit Affect the First-Time Buyer?
For once, it seems that first-time buyers are receiving the better end of the deal!
Brexit won’t make it more difficult for first-time buyers in the UK to purchase a property, unless their means of income is affected as a result of Brexit. In fact, taking out a mortgage is currently easier for first-time buyers.
Ray says:
Brexit is a contributory factor in the slowdown, both in activity and pricing, in the housing market and – from a mortgage perspective – the availability and pricing of a 95% mortgage has improved significantly over the last year.
A 95% mortgage is most common among first-time buyers, as it only requires a 5% deposit so it’s easier to save for. Although we must bear in mind that Brexit isn’t the ultimate or only factor affecting the housing market, it’s discouraging people from buying properties and therefore creating more competition among lenders to have the best deals to attract first-time buyers.
Now’s the Time to Move
Brexit is by no means a reason not to move. It’s creating a lot of opportunity. Competitive deals, low interest rates, flexible terms and mortgage criteria – you don’t want to miss out.
Your mortgage adviser can help you decide what kind of mortgage, rate and lender suit your circumstances. Call us on 0330 433 2927or make an enquiry.
Categories:General, Robyn Clark
The blog postings on this site solely reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them.