How Will Brexit Affect My Mortgage?

How will Brexit affect my mortgage?

Predictions of a housing market price drop as a result of Brexit have sent many homeowners into quiet panic.

Many fear that leaving the EU will result in a drop in the value of the pound, a rise in inflation, higher prices for the British public, and a knock-on increase in interest rates. While there is no telling for certain how these areas will play out, a closer look at some of the facts can help us to put things into perspective.

Mortgage rates

Unavoidably, the rates offered by banks and building societies are tied to the Bank of England’s rate, which is currently set at 0.5%. But if this rate goes up, as ex-Chancellor George Osborne warned immediately after the referendum, interest rates would then rise with all lenders, in line with the standard base rate.

Of course no one really knows whether interest rates will rise for sure. It depends on many factors, including if prices go up, if the pound drops, and if the Bank of England decides to put up interest rates as an effective way to fight an economic crisis!

The good news is that even with a drop in the pound’s value, the Bank of England has, in the past, been reluctant to put interest rates up, their reasoning being that hiking up interest rates can create more problems than solutions in the long term.

Your mortgage over months and years

Every mortgage holder borrows a fixed amount against the value of their property, but the interest rate on their mortgage can go up or down.

Many homeowners opt for a fixed rate mortgage for 2, 3, or 5 years, and then either stick with their lender’s variable rate or switch to another mortgage provider to find a more competitive interest rate.

Of course, fixed mortgage rates will only be fixed for as long as the mortgage contract lasts, and if the national interest rate goes up then mortgage rates from any lender will go up with it, but competitive rates may still be found in the long term.

How will Brexit affect my mortgage?

If you already have a mortgage and the value of your property drops, as some financial commentators are predicting, it means you could end up paying off more for your home than you bargained for.

First-time buyers might consider taking advantage of lower market prices to get on the property ladder more affordably.

While the Chancellor has warned that property prices could fall by 10-18% as a result of Brexit and the falling pound, prices could still be helped by foreign investment. With currency exchange rates in their favour, foreign buyers from Europe and elsewhere may bolster the UK housing market and keep demand, and therefore prices, stable.

Still asking “How will Brexit affect my mortgage?” No-one knows the long-term effects of Brexit on homeowners, but the housing market is certainly more unpredictable as a result. In light of this, it’s perhaps safest to say that homeowners should plan for the unexpected, and take good care of their finances in the meantime.

Don’t worry about your money. Call Expert Wealth Management on 01993 772 467 or contact us online and let us help you plan for a brighter financial future.

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