Home mortgages in the UK are unlikely to be affected immediately by the decision to leave the European Union, according to finance commentators.
However, it could be good news for first time buyers if price growth slows and interest rates fall with some experts predicting that the Bank of England might reduce rates even further than the current historic 0.5%.
In the short term, people’s attention will be on interest rates and what impact this will have on mortgage costs, according to the Council of Mortgage Lenders. ‘While markets are bound to react to the news, the question will be how long it takes for them to settle. We know the authorities will be mindful of this,’ said the CML spokesman.
In the medium term, there will also be interest in the extent to which housing transactions are affected by economic uncertainty, and whether this will impact on house prices. The more quickly markets resettle, the lower the impact on the housing market is likely to be. However, any prolonged disturbance would inevitably impact the housing market.
‘For lenders, the treatment of customers and of mortgage applications will be business as usual. People who have received mortgage offers will not see them affected. People facing financial difficulty will continue to be treated constructively and positively,’ the CML spokesman explained.
‘Lenders remain open for business as usual. Mortgage pricing is unlikely to react instantly, although pricing may be affected in the foreseeable future because of the effect on lenders’ cost of funds arising from the perception of economic uncertainty. How long this lasts will depend on how quickly markets resettle,’ he added.
Indeed, Mark Carney, governor of the Bank of England, quickly announced that any measures needed to support financial markets and the UK economy would come into play.
These measures could include a cut in interest rates that could reduce home owners’ monthly mortgage payments, a measure repeatedly taken during the financial crisis of 2008.
James Roberts, chief economist at real estate firm Knight Frank, believes that an interest rate cut is on the cards. ‘We expect the Bank of England, seasoned by the experience of financial crisis, to respond quickly. An interest rate cut of 25 basis points is a strong possibility at the Monetary Policy Committee’s July meeting, or perhaps earlier if required,’ he said.
