Brexit and mortgages

brexit and mortgagesFollowing yesterday’s vote by the British electorate to leave the EU, many mortgage holders will be asking how this may affect them.

We are all aware of how uncertainty and volatility can affect the market, as witnessed in 2008.

Many more cautious mortgage borrowers will already be on fixed-rate products, and they will know that their pay rates will not be changing for some time.

Those mortgage borrowers who are now concerned about the immediate impact of Brexit should perhaps switch their mortgage to a fixed-rate deal now.

Available pre-Brexit fixed-rate mortgage deals

  • 2 year fixed rate mortgages from 1.43%
  • 3 year fixed rate mortgages from 1.89%
  • 5 year fixed rate mortgages from 2.12%
  • 10 year fixed rate mortgages from 2.89%

Brexit and property

How will the EU Brexit vote affect property prices?

Property prices are, of course, driven by demand and it could be argued that any detrimental effect on EU workers in the City could see a drop in high-end prices in London.

Across the country, demand for property is unlikely to decrease as population is still building and this may not change for sometime.

The most likely effect of Brexit on UK property is a period with a lack of sales and market movement. People do not like to sell the property and upscale when they are uncertain about future economic prospects.

Brexit and housebuilding

How will the Brexit vote affect housebuilding?

The large developers are notorious for hanging onto large parcels of building land and not starting development until they know they are entering a period when they can expect to get high demand and a strong price.

It may well be that these large developers hold back on new developments over the next couple of years whilst they assess their position.

Brexit and the help to buy scheme

The Government is committed to helping first-time buyers onto the property ladder, and home movers to move up the property ladder, through the help to buy scheme.

The help to buy scheme of course costs money, and all the economic predictors suggest that tax revenue will be affected by Brexit. This could affect funding opportunities for first-time buyer schemes like help to buy.

There will be a line of argument that says control of immigration following Brexit will reduce demand on property, but it is unclear what effect that would have on the first time buyer market since most new migrants are more likely to be seeking rental accommodation.

Brexit and mortgage rates

Mortgage rates are driven by factors in the global finance markets. The Brexit vote will no doubt introduce volatility into those markets and the key effect will be the impact on base rates.

Bank base rates have been kept low over the last eight years during an unprecedented period of low inflation.

We have already seen the value of the pound drop markedly overnight and we have yet to see how that will stabilise. A weak pound could put pressure on prices and increase inflation.

Fixed rates are driven by swap rates which are measures of the cost at which Banks lend to each other. A Bank lending money in the UK in GDP may be borrowing the money in a currency which becomes more expensive to purchase in pounds. This makes UK money more expensive and we may see a rise in fixed rates before too long.

Further, the simple effect of volatility in the market will cause Banks to set their fixed rates higher to give themselves a margin for future problems.

Brexit and mortgage affordability

Rising mortgage rates reduce affordability for the borrower. This happens because mortgage affordability is calculated from income, outgoings, and expected mortgage costs.

The Mortgage Credit Directive of earlier this year was an EU driven piece of legislation which did tighten affordability calculations in a number of areas of the mortgage market. Even if a future UK is not a member of the EU, it is unclear whether the Financial Conduct Authority would roll back any of those rules to free the market back up.

Mortgages and uncertainty

Where are we going as a result of yesterday’s vote? The truth is nobody knows for sure, nor can we be sure what effect the Brexit vote will have on the stability of the Government. We may well find ourselves with a General Election on the horizon by the Autumn of 2016, and it may be several years before we fully understand the financial implications of the Country’s decision.


Our conclusion is that coming into a period of massive uncertainty where we are treading ground we have not seen before, the cautious borrower may well be advised to fix their mortgage rates. This ensures at the very least that volatility and uncertainty globally does not impact on the family budget.

Available pre-Brexit fixed-rate mortgage deals

  • 2 year fixed rate mortgages from 1.43%
  • 3 year fixed rate mortgages from 1.89%
  • 5 year fixed rate mortgages from 2.12%
  • 10 year fixed rate mortgages from 2.89%
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