This is a question I am often asked. As an experienced mortgage advisor I actually began my career during the Financial Crisis of 2007-2008. Whilst I don’t believe we will see a return to this chaos on the financial side, there are some striking comparisons. Mainly a stalling of the property market in some areas.
Bank of England guidance
There are many possible outcomes with Brexit, but let’s start with the guidance given by the Bank of England. Mark Carney, the central bank’s governor, has repeatedly warned that interest rates could move in either direction in response to a chaotic Brexit. However, he has indicated that the Bank of England would be more likely than not to cut interest rates to support the economy if Britain crashed out of the EU without a deal (Source).
These comments were made in February though, now the thought process is that The Bank of England will delay interest rate decisions until it has a clearer picture of how the UK economy will be affected post-Brexit (Source).
When we look at mortgage rates though, we can’t simply focus on what the Bank of England are doing, there are so many other factors that can influence the cost of borrowing for lenders and how their mortgage products are priced.
Competition for new mortgage business is now very strong which is causing some bespoke mortgage lenders to drop out of the market or rethink their strategy (Source). We could see more of the top mortgage lenders relax their criteria even more to attract new business by removing or lowering their barriers. This can only be a benefit to homebuyers and those remortgaging.
Attractive mortgage rates but Homeowners are not budging on price
We have to appreciate the fact that at this moment in time interest rates are extremely attractive for First Time Buyers, Home Owners moving and Remortgage customers. In fact, lenders actually cut their mortgage rates at the beginning of the year to try and stimulate growth (Source). This is because the uncertainty caused by Brexit is causing many Homeowners to also adopt a ‘Wait and see’ approach. I am certainly getting this feedback from many Estate Agents around the UK.
Where the price is right however, buyers still have the appetite. The problem this year for many estate agents will be convincing property owners to adjust their property price expectations. The Royal Institution of Chartered Surveyors (RICS) say that there is a reluctance from some vendors to acknowledge the shift in the balance of power in the market which will compound the difficulty in executing transactions (Source).
Swing towards longer fixed rates
If you are looking to get a mortgage in 2019 you need to consider the affects of any interest rate changes on your current budget. We have seen a big swing towards longer term 5 year fixed rates over the past few months. These mortgages are more suited to those people who require payment stability over the long term who have no desire to redeem their mortgage within the 5 year fixed period.
It really is down to your personal circumstances though. Longer term fixed rates do tend to come with Early Repayment Charges and you could be stung with a huge exit fee if you need to redeem the mortgage within the fixed rate period, by selling your property for example.
A good time to buy?
It is obvious that there is a clear link between the Brexit delay and the property market stalling. This is causing lenders to become more competitive with their mortgage products. The competition between mortgage lenders is likely to continue the longer that Brexit is delayed and the longer it takes for property owners to ‘hold on’. All of this means that now could be the right time to buy if you find your perfect property and you are able to negotiate a good discount.
Author: Ben, Glow Mortgage Advisor (CeMAP, BSc Hons)
Date Published: 15th March 2019
This article is a blog post opinion and does not constitute personal advice or recommendation.