The UK’s impending withdrawal from the European Union doesn’t appear to be heralding great things for the nation’s economy so far – with falls in the value of the pound, reports of job losses, and people stockpiling food and medicine.
And then there’s the housing market. The outlook is predicted to be worse than in the last two decades, with the Royal Institution of Chartered Surveyors (RICS) reporting a fall in the number of house sales and a dip in prices as the Brexit deadline nears. (Although the average house price in the UK remains around £230,630.)
But could this housing slowdown be a golden opportunity – might it be a blessing in disguise for generation rent, currently priced out of the market, or the ideal moment for homeowners to get a great remortgage deal? We asked the experts.
David Blake, Which? mortgage advisor, says Brexit could go either way for renters looking to get their foot on the ladder. “Yes, a blip in property prices could mean some bargains. Mortgages are very cheap right now compared to how much they have cost historically. Mortgage repayments could be lower than rent,” he says. ”[But] this is on the assumption that property prices go back up of course, of which is no guarantee.”
And there is potential for the housing slowdown to be bad news for first-time buyers, he warns. If property prices continue to drop over a long period of time, first-time buyers who thought they were getting a bargain, could end up in negative equity (when your mortgage is bigger than the value of your property).
So how to judge the moment? Blake says you should ask yourself the question: “How much is your rent? How much would your mortgage payments be both now and in the future? You could argue that at least by having a mortgage you are paying for an asset as opposed to renting. However, this asset could be depreciating in value.”
Blake says which way the pendulum will swing all depends on what happens to property prices moving forward: “Which of course we don’t know now.”
He reminds all would-be buyers that taking out a mortgage is inherently risky, whenever you choose to do it. “It is really important you understand the risks associated with having one and the potential for negative equity and what that could mean,” he says.
The one certainty about Brexit is the uncertainty, both of outcome and impact.
The news might be better if you’re already a homeowner, says Martin Lewis from Money Saving Expert. This could be the perfect time to look at your mortgage payments and think about potentially remortgaging for a better deal.
While Brexit uncertainty looms large, mortgage rates are still near all-time lows, so it’s an opportune time to check if you can undercut your current deal,” says Lewis. He emphasises the importance of checking if you’re one of the 2,000,000 people in Britain who are on a lender’s standard variable rate (SVR).
If you are interested in looking at your re-mortgage options you should start by finding out about your current mortgage - the rate you’re paying, outstanding debt, what type of mortgage you’re in and how long is remaining. And are there any early exit penalties? Once you’ve established that you can use a mortgage comparison site to look at your options.
“If the Bank of England is right that a no-deal means an economic downturn (and that’s a big if), on one hand you’d expect an interest rate cut to stimulate spending, but as the pound would also likely drop, pushing up inflation, that predicates a rise,” Lewis says.
“The one certainty about Brexit is the uncertainty, both of outcome and impact. So if certainty is what matters to you, get a cheap fix now, and the more you want certainty, the longer you should consider fixing,” says Lewis. “I’m not saying that with hindsight it’ll be the cheapest route, just that you’re far less subject to huge economic winds.”
So what does the future hold for the housing market? Blake says: “It all depends on what happens in parliament. If a deal can be agreed (and by no means am I saying one should be) then this could bring some clarification and certainty to the economy which could stimulate the market.
“If a deal is not agreed, it’s difficult to see those who are undecided about buying, moving forwards. This is likely to continue to stagnate the market.”