As well as inflation and GDP
In just over three months the polls will be counted and the future of the UK determined following the Referendum set for 23 June 2016. Whilst Cameron, Johnson and their respective teams are busy campaigning, market experts are speculating about how could a Brexit result affect the UK property and mortgage market, as well as inflation and GDP?
“Brexit” or “Remain”
The Referendum is set for 23 June, for British citizens to vote “Brexit” or “Remain”. David Cameron is pressing full steam ahead with his campaign that the UK are stronger as part of the EU, whereas other senior leaders, now joined by Boris Johnson, are calling for an exit from the EU, and independence.
The general feeling from experts and trade bodies, is that a Brexit would’t affect the mortgage market significantly.
Mortgage regulation
It is believed by both Council of Mortgage Lenders (CML) and Building Societies Association (BSA) that UK mortgage regulation is unlikely to change due to a Brexit.
“If the UK population votes in favour of Brexit it is highly unlikely that we will see much, if any change in the regulatory environment in the short term.” Paul Broadhead, BSA head of policy
In the future, independence from the EU would enable the UK to develop their own regulatory system, however whether or not there would be reason to do so is another matter.
Mortgage lending
Both CML and BSA were not so clear cut when discussing the effects Brexit could have on mortgage lending.
Whilst they recognise that customers will still want to buy homes and lenders will still be providing finance for them to do, any deeper effects are largely unpredictable at this stage.
It is suspected though that as a major financial centre, the UK will continue it’s connections with global economies, both in the EU and further afield.
“There is no simple answer to the question of how Brexit might affect housing and mortgage markets.” CML spokesman
Mortgage rates
There is a possibility that mortgage rates could increase on the back of a Brexit, due to UK job losses and increased inflation causing financial products such as mortgages to be more expensive.
“Brexit could cause UK job losses and eventually cause mortgage rate increases.” Jayne-Anne Gadhia, Virgin Money chief executive.
House prices
Then there is also the matter of house prices, could Brexit affect the roll that the UK has been on in recent years with rising property prices?
Whilst a survey from Emoov resulted in one third of property owners believing Brexit would increase their property value, the word from the experts is still undecided.
The general feeling is that they wouldn’t be affected, however there is also speculation that overseas buyers may not find the UK such a popular choice, specifically London, so this could dampen certain parts of the property market.
“A Brexit would be unlikely to affect house prices” Ed Stansfield, Capital Economics chief property economist. “But it’s possible that the UK could be slightly less attractive for overseas buyers, in particular London.”
Construction companies could also find recruiting overseas workers difficult with visa restrictions, which could curb property development.
Inflation
Again, experts are undecided on whether the UK leaving the EU would cause inflation to rise.
A Brexit is likely to cause an element of economic uncertainty, which in turn could cause a fall in sterling with the knock-on effect being a rise in inflation. However, the severity of this is unknown and doesn’t appear to be a major concern for the market at this point anyway.
“You’d need to see the currency fall a very long way before that would become a big enough threat to the inflation outlook that the bank of England would start to raise interest rates to the level that would start to cause problems” Stansfield
GDP
A report by Open Europe suggests that GDP could be affected in the short term by an exit from the EU, however, long term it would stabilise.
Striking trade deals prior to the “leave” will be essential to protect reasonable GDP fluctuations, the report hints.
Dental & Medical Financial Services are keeping abreast of the Brexit versus Remain debate and how each option could affect the financial services markets. Keep reading our blogs for more news.
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