Four and a half years after the public voted to leave the EU, the Brexit deal came into effect on the 1st of January 2021, laying out the trade agreement and the level of ongoing European involvement. The deal came into effect on the 1st of January as the withdrawal agreement came to an end. So, in terms of mortgage rates, how it might impact investment house mortgage rates and the UK housing market, overall?
Since the EU referendum, uncertainty has been at the forefront for many sectors. Having dealt with political and economic uncertainty in recent years, the UK housing market has largely remained resilient. This has continued even throughout the coronavirus pandemic.
House prices unlikely to be impacted in the short term
It’s difficult to know exactly how Brexit will impact the UK housing market and investment house mortgage rates. However, with a deal in place, many feel Brexit is unlikely to have much of an impact on the sector in the short term. House prices will likely be more impacted by the country’s economic recovery from COVID-19 and job uncertainty.
If Brexit causes significant job losses, this could lead to a slight drop in house prices. Many in the property industry are already forecasting house price growth to slow down in 2021, but some argue that prices will not fall, or at least not by much. If house price growth does slow down, it could prove to be a beneficial time to invest in property.
Housing market demand
An article by This is Money states many homebuyers’ decision to purchase property is based on employment rates and mortgage availability, and mortgage interest rates have been at record lows due to COVID-19. Some are even predicting the Bank of England could lower the base interest rate into negative territory.
The number of mortgage products on the market are increasing as lenders gain confidence, making it easier for homebuyers and property investors to secure mortgages for their property purchases. On the other hand, if interest rates increase, the rates are still at low levels which makes now a good time to lock in competitive deals.
With the stamp duty holiday in place until the 31st of March, demand in the UK housing market will remain strong throughout the beginning of the year. And as homebuyers have reassessed their home priorities in the wake of COVID-19, moving home will likely remain at the top of many people’s agenda even after the stamp duty holiday ends.
Job uncertainty, which will likely lead to more people renting for longer, is expected to have a more significant impact on the housing market than Brexit. And with the furlough scheme set to end at the end of April, many are predicting unemployment levels will be the highest.
At this point, transaction levels are expected to drop, so some buyers and investors will likely wait and see how the economy and housing market fares. This is Money also states that some people believe if people are confident enough to purchase property during a global pandemic, they will also be confident to buy property post-Brexit.
Renewed confidence could keep the market moving
There is renewed confidence with two COVID-19 vaccines approved in the UK and as more vaccine doses become available, consumer confidence could return to the wider economy and housing market. This will keep the market moving and few people will likely use Brexit as a reason not to invest in property.
The UK housing market has remained strong since the sector’s reopening after the first national lockdown in 2020. Because of its strength, the sector will likely not be too negatively impacted overall by Brexit. While there is still uncertainty ahead with how the Brexit deal will impact the economy and housing market, the market is likely to remain resilient.
UK mortgage approvals at highest level in 13 years
UK mortgage approvals have risen to the highest level in 13 years, driven by the government’s stamp duty holiday and buyers reassessing their living situation during the coronavirus pandemic.
Figures from the Bank of England showed the number of mortgages approved by banks and building societies for home purchases had leapt to 105,000 in November, the highest figure since August 2007.
Threadneedle Street said the number of monthly approvals had increased by 7,700 on October’s level, reflecting a boom in the mortgage market during the month when rapid growth in Covid infections led the government to impose a second national lockdown in England.
Mortgage borrowing plunged during the first Covid lockdown as the crisis sank Britain’s economy into the deepest recession for 300 years, hitting a trough of just £200m in April 2020. Borrowing soared to £5.7bn in November, up £1.2bn on the level in October.
The number of new mortgage approvals, which provide an early indicator for borrowing levels in future months when buyers take up their mortgage offers, have increased more than tenfold, after hitting a low point of 9,400 in May.
Figures from the Bank also showed households repaid £1.5bn of credit card debt, personal loans, and car finance in November, which is a reflection of weaker consumer spending during the second national lockdown and some households in which people work from home being able to save money.
Since the start of the pandemic in March, households have repaid £17.3bn of consumer credit, according to the Bank, bucking a trend in recent years for rapid growth in credit-card borrowing.
While many low-income workers have suffered a financial hit during the pandemic, total household deposits increased by almost £5bn on the month to reach £17.6bn, as people saved money while much of the high street was closed.
Despite the boom in mortgage approvals equivalent to the last days of the mid-2000s property bubble when zero-deposit mortgages were still widely available, analysts warn that a sharp drop in activity is looming.
The UK housing market boomed in 2020, with property prices soaring to a six-year high as people rushed to take advantage of the stamp duty holiday and re-evaluated their living arrangements during the lockdown.
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