Friday, 12 August 2016

How will affect mortgages and interest rates following BREXIT ?


Just over two months from the Brexit vote, what is expected to happen to mortgages going forward?

Bank of England has cut the interest rate from 0.5% to a historic low of 0.25%, which will have a knock-on effect on mortgages.

Jeff Matsu, senior economist at the Royal Institution of Chartered Surveyors (RICS) said there was also less demand and activity in the housing market due to uncertainty.

Mr Matsu said: “All of this puts downward pressure on things like mortgages. We will know more when the Bank of England meets next month.”

The interest rate had already been set at a historic low of 0.5% since the financial crisis in 2009.

The further cut on August 4 will directly reduce the interest paid on mortgages that track the Bank of England base rate.

Mr Matsu said that fixed rate mortgages could also be fixed at even lower rates if the Bank of England interest rate comes down.

Jonathan Hopper, managing director of the buying agents Garrington Property Finders, said that Britain is unlikely to see a repeat of the credit crisis and lenders are still offering very low rates for mortgages going forward.

“The message we are hearing from lenders is they are firmly open and ready to lend, potentially at lower rates,” Mr Hopper said.

“I think there will be a rush for fixed rate mortgages. While we are not going to see rates going up any time soon, in an uncertain world a lot of people value certainty.”

Mohammad Jamei, senior economist at the Council of Mortgages lenders, said there was still “considerable uncertainty” in the wake of the Brexit vote.

He said: “Although mortgage firms have ample lending capacity, activity levels are likely to bear the brunt of any market adjustment over the next six months or so, as buyers and sellers wait to get a clearer idea of where we might be headed.”

Mr Jamei predicted that the Bank of England would undertake some kind of monetary easing in August due to the British economy's “uncertain outlook”.

He said: “Over the next six months, activity is likely to soften modestly, while lending will be driven more by remortgaging and less by house purchases.”



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