What effect will Brexit have on my mortgage?
The effects of Brexit on the UK property market are currently incredibly unpredictable. However, while we don’t have a crystal ball to hand we can help estimate what some of the affects might be, should we leave the European Union. Read on to find out what they are.
Great Britain’s exit from the European Union has proved to be an all-consuming part of newspaper headlines for the last two years. And with no concrete exit strategy in the works there’s uncertainty as to whether we’ll be leaving the EU at all. The problem with all of this unpredictability is that it creates a clear problem for mortgage advisers and mortgage brokers on how to forecast the effects of Brexit on the UK property market. However readers, we’re going to do our best to answer any outstanding questions that you might have. Read on to find out more!
How will Brexit affect mortgages?
Since that fateful day on 23rd June 2016, the entire country has been in a meltdown as to what the subsequent effects of leaving the EU might be. And since then, most of us are still none the wiser. While the initial shock of the referendum result had a pretty big impact on the financial market, it has seemingly managed to dust itself down. However, with the substantive effects of Brexit still a huge uncertainty to the whole country, the impact that this has had on the financial market is more profound than meets the eye.
The effect of Brexit on the Bank of England’s base rate:
For those of you who are unaware, the Bank of England’s base rate has a huge affect on mortgage interest rates in the UK. This is because interest rates in the UK are benched against an indexed rate, which in this case is the base rates set by the Bank of England. What this means is that if the base rate increases, then so will interest rates and vice versa.
The reason for any sudden rate increases by the Bank of England is to stabilise the UK economy and ensure that it grows at a steady rate. The effects of Brexit have led to predictions that interest rates will increase for a third time in 18 months before the end of the year. So, what does that mean for those who currently have mortgages or are about to start their mortgage applications?
Following the financial crash in 2008, homeowners and prospective buyers in the UK have benefitted from low interest rates. With interest rates always coming under 1% for the last decade. However, November 2017 saw the base rate in the UK increase from 0.25% - 0.5%, a first increase in just under a decade. So, should homeowners take heed of this as a sign of things to come?
While no one can really provide any concrete proof of the impact that Brexit will have on the financial market, it’s clear to see that it’s having some sort of effect. This is mainly coming in the form of how consumers spend their money which in turn is beginning to have an impact on the property market and in particular, mortgage interest rates.
How should I deal with the effects of Brexit to my mortgage?
A sudden hike in interest rates may leave you considering what your next options might be in the property world. This will be a great cause for concern if you currently have a variable rate mortgage. This is because homeowners who currently have this type of mortgage deal will be susceptible to future interest rate increases. This will, in turn, mean that their monthly repayments will increase due to rising interest rates.
However, for those of you on a fixed rate, this will not have quite the same effect. If you are unaware of the effects of fixed rate mortgages, it means that if interest rates increase then your rate will be fixed to the rate that you were on at the start of your mortgage term. So basically, if interest rates increase during your fixed mortgage term then this won’t affect you. This can afford great protection for your finances. So, most mortgage advisers will advise that you look at remortgaging to a fixed rate deal soon if you feel that you won’t be able to afford your current deal if interest rates continue to increase. However, while you are enjoying the security offered by a fixed rate mortgage during turbulent times be warned. If interest rates have staedily rose while you have been on your fixed rate, you could be in for a shock at the end of your fixed term when you jump back into the mortgage market at the new rates.
What will the future hold?
No one truly knows what the future holds with regards to Brexit. This means that most mortgage advisers are going to struggle to predict how it will affect the property market and household mortgages in the long term. All we can really go by is the recent interest rate hikes and how until an exit deal is delivered we can expect these to continue to rise. While we can’t provide you with any concrete answers as to what the future holds but we can help you prepare for how the property market may change.
What can we do to help you?
While we can confirm that we won’t be at the forefront of Brexit negotiations we can help you prepare for any potential problems that our exit from the European Union may pose. At Mortgages Online we are a mortgage adviser who can impartially compare thousands of deals from loads of different lenders. This means that if you feel like you need to batten down the hatches and remortgage to a deal which will be better equipped to combat the effects of Brexit, we can help!
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