What happens now?
Whatever your personal opinion on Brexit, Britain chose to leave the EU and the wheels are in motion. The effects of this decision may take many years to recover from, financially and economically. In the short-term though, information is the key. With a possible further interest rate cut on the cards, what does Brexit mean for your mortgage?
This does not constitute advice and advice should be sought in all instances before acting on it.
Your property may be at risk should you be unable to maintain any agreed mortgage payments over the term agreed.
Out of your control
The first thing to remember is not to panic. Like with many things in economics and politics, there is very little that can be done now to affect the situation. It is just a case of letting things pan out.
The currency and stock market situation has stabilised a little since results day, so it seems the immediate shock has dissipated, although timeframes for everything else is unclear right now.
In the short-term, the best practice to ensure you are protecting your financial position, is to seek guidance from professionals, and arm yourself with information and facts that will help you make accurate decisions when the time is right.
What a further rate cut may mean for your mortgage
The Bank of England (BoE) are considering cutting their base rate even further to counter balance the possible effects of inflation and to keep money circulating in the UK economy.
The base rate has been at an all time low of 0.5% for over 80 consecutive months. Prior to the EU Referendum, the base rate was expected to rise in 2017.
Already it seems, things could be taking a U-turn, with the expectation that Mark Carney, Governor of the Bank of England, will announce his plans soon.
Do you have a Tracker mortgage?
If you are on a Tracker mortgage then you could see small savings with a further cut in rates. Your mortgage arrangement “tracks” the base rate so any rise or fall affects the amount of your monthly payment.
Someone with a repayment mortgage of £150,000, may see a discount from £673 to £654, broadly speaking.
Most people who are still on a Tracker mortgage are doing so for the flexible terms, as during the financial crisis Fixed rate mortgages became so competitive that the majority of homeowners chose to “lock-in” and reap the rewards of the lower rates for the longer-term.
Do you have a Fixed Rate mortgage?
If you are on a Fixed rate mortgage, you won’t notice any difference with your mortgage payment, at least for now. Fixed rates are set by the lender and are also largely independent of fluctuations in the base rate.
Fixed rate mortgages have been available for the past couple of years at all-time low interest percentages. With a competitive market, lenders have continued to slash their prices to beat their competition. This was driven by fear that the base rate was going to increase in 2015, then it never did.
Fixed rates are based on the market’s expectations of future rates, along with other factors. So the big question now is will fixed rate mortgages fall even further?
The next step for your mortgage?
At this early stage of the Brexit adjusting period, the key thing to do is to take professional advice on your personal circumstances.
Depending on whether you have a Tracker or a Fixed mortgage, and, how long remains on your mortgage term, will depend on what your next step could be.
Also, if you are buying, or selling, timing could be important.
Keep an eye on our Monthly Mortgage Updates, by Chris, our specialist mortgage adviser. Here we provide the best mortgage rates and deals for the month, as well as market updates.
Get a mortgage review with Chris
If you would like us to undertake a review of your current mortgage deal or you are thinking of purchasing in the near future and require funding, please contact Chris for a free, no obligation appraisal.