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Countdown to Brexit – housing and the mortgage market

Written by Ipswich Building Society

30 Sep 2019


Brexit, Housing market, Interest rates

4 min read

No matter how much you try, you simply can’t get away from it – so with a tentative proposed deal on the table and a huge amount of uncertainty ahead, we’ll be looking at the possible effects of Brexit on the housing and mortgage market and how that might impact your finances.

How is the housing market changing?

House prices have been rising throughout the UK since the dip in the market following the 2008 financial crisis. In recent years however that increase has slowed down, particularly around London, where house prices overall have even declined slightly. While the slowdown in the market has occurred since the 2016 referendum, it’s not clear if our impending withdrawal from the EU is the cause or if the general overheating of the market would have inevitably led to a cooling regardless of the referendum result.

Recent figures have shown that house price growth has almost stalled, rising only 0.2% in the year to September 2019.

What could Brexit mean for housing in the UK?

There is much disagreement on what effects various types of Brexit might actually have on the economy.

The Bank of England Governor Mark Carney has caused a stir by warning that, in a worst-case scenario, a no-deal Brexit could lead to house prices across the UK crashing by a third. While this might be devastating to many homeowners who would face being trapped in negative equity, some first time buyers might not see it as such as bad thing, suddenly finding themselves able to reach the lower rungs housing ladder. However, if a deal is finalised and a smooth transition follows, a modest rise in house prices can be expected according to some reports.

If Brexit eventually leads to stricter controls on people from the EU coming to live and work in the UK, and overall levels of migration continue to fall as they have done since the referendum, it’s conceivable that the current pressures on housing in some areas might ease slightly as more homes become available. However, future free-trade deals with other nations, including those oft-discussed agreements with India, China and the United States might include an easing of movement rules which could maintain or increase the current levels of migration into the UK.

What about interest rates?

A smooth departure from the EU might create conditions where interest rates continue to rise as they have done, as the economy begins to heat up and shake off business uncertainty. This may be unwelcome for both borrowers on variable or tracker rate mortgages who may see their monthly repayments increase, and for first time buyers who may find homes becoming more unaffordable. A no-deal outcome might be much more volatile – some argue that the effects on the economy would be immediate and severe, potentially leading to a lowering of interest rates, while others disagree.

Whatever happens, our departure from the EU is a globally significant moment, carrying with it both huge risks and perhaps huge opportunities – and until the moment we have actually left, only time will tell how it will affect people’s lives in the country at large.

This article was published under our previous name of Ipswich Building Society. We changed our name in 2021 – find out more.

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