Are the Effects of Brexit being Felt by the Mortgage Market?
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Are the Effects of Brexit being Felt by the Mortgage Market?

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Carl Shave Carl Shave | October 24, 2016

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It’s now a little over four months since the EU referendum, and while the leaving process is still yet to begin (and likely to be, the result has already had a dramatic effect on the financial markets and many other areas of the economy. The effect felt in some quarters has been highly visible, with the pound plummeting and the FTSE 100 soaring, but the impact on the mortgage market, while marked, has been a little more difficult to spot. The availability of mortgages has increased Research by the consumer group Which? found that the number of mortgages on the market has increased by 13 percent in the four months since the referendum. At the end of September there were 5,366 mortgage deals available, compared with 4,736 in June. The number of deals available to first-time buyers with 5 percent deposits rose by 7to 245 in September. There was a more significant increase in the number of 80 percent mortgages on the market, rising from 516 in June, to 609 at the end of September. There were also more mortgage deals for existing homeowners, with the number of 60% remortgage deals up from 345 in June, to 421 in September. The cost of mortgages has fallen Not only are there only more mortgage deals on the market, but the cost of these mortgages has fallen. The average interest on a 95 percent first-time buyer mortgage is down by 0.13 percent since June, to 4.14 percent. In the same period, the average 80 percent mortgage has fell by 0.1 percent, to 2.84 percent. Existing homeowners are also benefitting from better deals, with the average rate on a 60 percent mortgage falling by 0.07 percent to 2.23 percent at the end of September. The base rate has been cut One of the most obvious ways Brexit has impacted the property market is the base rate cut, and some analysts predict this could fall further, from 0.25 percent to 0.1 percent by the end of the year. This cut will ensure mortgage advisors remain busy over the coming months as buying a home becomes even more affordable. The reduction in rates is also good news for existing borrowers. Those on tracker mortgages will instantly benefit from the rate cut, while others can seek to take advantage of the cheaper mortgages that are now on offer. This will keep the remortgage market buoyant irrespective of the direction of house prices. House prices are up While it’s still quite early to tell the impact of the Brexit vote on house prices, we certainly have not seen the significant falls some experts were predicting. Prices have remained relatively stable across the board, and while some regions have experienced small decreases, many others have experienced steady rises. The Halifax and Nationwide price indices show that UK prices have increased by an average of 1.6 percent, from £211,231 to £215,008, since the vote to leave the EU. The falling pound has played its part in this increase, with UK property representing better value for foreign investors. What’s next? The effects of Brexit are already being felt by the mortgage market. At the moment the impact is largely positive for borrowers, but it will be interesting to see how this changes as the process of leaving the EU begins.