With the EU referendum fast approaching, both sides of the Brexit divide are building momentum as they look to convince the British public. Even though those behind the ‘leave’ campaign are thought to have a slight edge at present, the referendum remains too close to call and this uncertainty is having an impact on numerous aspects of the British economy.
The property market is no exception, with the demand for new housing and price points stagnating amid widespread confusion and the potential, financial risks posed by Brexit. In fact, it is estimated that the sustained build-up to the referendum will ultimately see house prices fall nationwide throughout the third financial quarter, with this decline likely to continue if the UK does decide to exit the European Union.
Brexit, the Property Market and the cost of getting a mortgage
So what will happen to the property market if the UK does decide to exit the EU? While nobody can predict the precise outcome, it is thought that the cost of an average mortgage would rise by nearly £1,000 should Brexit take place. The uncertain future that lies outside of the EU would be a key driver of this, as this would instantly serve to tighten credit conditions and trigger an increase in base rates. Once the exit was confirmed, the Treasury claims that this would translate into higher monthly repayments and could even trigger negative equity in some homes.
Of course, leave campaigners have described this as scaremongering, although independent financial experts tend to agree that leaving the EU will trigger instant tremors throughout the British economy. Money saving expert Martin Lewis believes that leaving the EU poses a significant economic risk, for example, with potential hikes in the cost of mortgages and basic commodities central to this. Such a move would limit the amount of disposable income available to the typical UK household, especially with earnings unlikely to increase substantially in the near future.
What about first-time buyers?
From the perspective of first-time buyers, the prospect is even worse. Despite the fact that brands such as Saffron Building Society have developed specialist mortgages for this demographic, it is thought they would be required to pay an estimated £810 per annum in the wake of Brexit. This will make it far harder for first-time buyers to initially access the market, particularly with the need to save a 20% deposit increasingly pressing. Quite simply, Brexit could push many first-time buyers over the edge and make real estate an unaffordable entity in 2016.
This is one of the primary, potential consequences of Brexit, and it is one for all home-owners to consider prior to the EU referendum.