What Effect Will Brexit Have on UK Property?
Ray Boulger, our Senior Mortgage Technical Manager, addresses the worries you have on the property market when it comes to Brexit and what is likely to affect you. To read more about the topic written in Ray's own words visit his blog post: Will Brexit uncertainty cause a property market crash?
00:46- Will Brexit cause a house price crash?
01:34- Should you wait until after Brexit to buy a property?
02:34- Will Brexit make it more difficult to take out a mortgage?
03:23- How is Brexit uncertainty impacting interest rates?
04:08- How will Brexit affect the first-time buyer?
05:33- Is now the right time to move?
06:44- Should you speak to a mortgage adviser before searching for a property?
07:34- Do you have any more recommendations regarding Brexit?
For a more in-depth discussion about how your mortgage may be affected by Brexit get in touch with us today.
Anyone thinking of buying a property whether as a new resident or as an investment is inevitably going to think about what impact Brexit might have on the property market and for some people, and particularly for those in London and in the South-east that may be quite an important consideration, for others much less so, but what we're going to do in this guide is talk you through the sort of things that are affecting the property market in relation to Brexit and what you can do to help your purchase.
- Will Brexit cause a house price crash?
I think there's absolutely no likelihood at Brexit causing a house price crash. Brexit has been effectively factored into the market for nearly three years now since we had the referendum and whilst inevitably when we know exactly what type of Brexit we're getting and when it's going to happen there will be some impact, I think that will be quite small with most of the impacts already there, also one needs to bear in mind that even when Brexit happens there's another two years at least of negotiations when a lot more detail is going to come out, so I think that the biggest impact Brexit is having on the market is in slowing down the amount of activity rather than affecting prices.
- Should you wait until after Brexit to buy a property?
I think that if the reasons for moving which in many cases are family related perhaps you need a bigger property, or your job move, if you're moving from that sort of reason that I would absolutely continue to move unless you're worried that Brexit might have an impact on your employment. So, subject to that to take advantage of the fact that the market is slow, puts you in a much stronger position as a buyer to find negotiate with it with a vendor and try putting in a cheeky bid, may well be that you'd be surprised how much lower a seller will accept the ticket if they're keen to move themselves, so if you wait until all the facts are known then actually, there's less uncertainty and you could easily end up paying more for the property just because uncertainties disappeared, so the time to buy is when there is uncertainty and sellers are nervous.
- Will Brexit make it more difficult to take out a mortgage?
I think that's a really interesting question and some people are concerned about that in reality for most people the answer is no, and we've seen most lenders continue to tweak the criteria to make its actually slightly easier for most people and the typically for those people with the smaller deposit rates have got lower. We have seen a small number of specialist lenders pull out of the market these are lenders who've had difficulty getting funding or have found that because the market is so competitive they just actually can't lend it a profit but there are other lenders that do the same type of lending, so there's no evidence to suggest that people will find it more difficult to get a mortgage and although some lenders have pulled out the market and we're only talking three or four, there are others coming into the market.
- How is Brexit uncertainty impacting interest rates?
Brexit actually has proved positive for home buyers in terms of keeping interest rates low for longer so we've now had Bank rate below one percent for ten years, it's currently one point 7% to 5%, and it’s not obvious next move will be up, although that could be the case, more importantly is that the likelihood is the next move will only be a quarter point any move upwards will be slow so borrowers are in the fortunate position of being able to borrow long term at very low interest rates and that is partly because of the uncertainty caused by Brexit, so for example one can even get a rate fix for as long as ten years out under 2 and a half percent.
- How will Brexit affect the first-time buyer?
Brexit hasn't in any way being detrimental to the first-time buyer, the mortgage availability for people with a 5% deposit has actually got better over the last couple of years the extra one has to pay an interest rate terms if you've only got a 5% deposit compared to somebody with a big deposit has fallen quite sharply. There are more lenders offering percent loan-to-value mortgages and even a number who offer cash back for as much as a thousand pounds, so mortgage availability has improved in addition to that for those first-time buyers buying a new built property to help to buy equity share a second charge scheme is a good option to think about in fact for anybody buying a new-build property, I would say that's almost certainly the best sort of mortgage to get, it does mean that you get a lower interest rate on the first charge mortgage which will be for 75% of the purchase price, you then get a 20% equity loan from the government on which you pay no interest for the first five years and already the quid pro quo for that is that the government gets twenty percent of any capital gain as house prices at the moment are actually pretty flat and probably won't move much for the next couple years the effective cost of the help to buy loans is really quite low for the borrower, no interest and probably not much capital going to share with the government.
- Is now the right time to move?
I think the right time to move is when it's right for you in terms of your personal circumstances, mortgage rates are at an all-time low pretty well so in terms of the cost of the mortgage it's a great time. The most important thing is to buy the right house at the right time so if you need bigger or perhaps a larger property for personal reasons if you're moving because of a job change or because you've got more income you can afford a bigger property, you're moving fresh operational reasons whatever the reason.
The fact that market is relatively slow at the moment does mean that buyer to in a much stronger place than they were a few years ago when the market is more active, so but sure in a strong position as a buyer to put in a shaky bid if you found a property you've really fallen in love with, you may be tempted to overpay but find me rational and negotiate strongly, and providing it's not a property where you think there's lots of other people interested you may well find that you can negotiate a good price.
- Should you speak to a mortgage adviser before searching for a property?
What somebody has decided it's time to move one of the first things to do apart from obviously doing your research on properties in the area you want to buy is to go and talk to a good independent mortgage broker, that way you will have the confidence of knowing how much you can borrow? What it's going to cost? So, you can work out if you are comfortable affording it, and also when you go and talk to estate agents you can say with confidence to that estate agent that I have a mortgage approved for such-and-such amount, that puts you in a stronger position, and also makes it easier to resist the advances some estate agents make, in going over the top in time to encourage you, should we say to see other mortgage adviser.
- Do you have any more recommendations regarding Brexit?
Well Brexit or not when one is looking to move in addition to actually seeing a good independent mortgage broker before you start an active search, I would also think about which solicitor your better use because the estate agent is going to want to know your solicitor early on and again if you know you're going to use that's really helpful the other point which I would strongly recommend you give consideration to, is having a decent survey done on the property. There's a big temptation particularly with a lot of lenders offering free valuations to actually just rely on a basic valuation that's done by the lender, but you really need to remember that is simply a very basic valuation and it's done only for the lenders use and in some cases it will actually be a desktop valuation there won't even be a value of is doing the property so well worthwhile spending a few hundred pounds having a home buyers report done which will either highlight some issues with the property which you might not otherwise been aware of you can therefore use that to negotiate on the price and either get the vendor to put those defects right or negotiate a price reduction or if the surveyor comes back and gives it an all-clear you've got the comfort of knowing that the property is in good condition and it should anything crop up at a later stage because that survey has been done for you and not the lender, you will have the right of the course against the surveyor if you ever needed that.
Thank you for watching this video setting out our views on the impact of Brexit on the property market. Do watch our other videos on our YouTube channel and we look forward seeing you next time, bye.