With the PM’s Panama Papers fiasco, exorbitant pro-EU spending and anti-EU campaigners desperate to draw-the-bridge on the Syrian migrant crisis, a British/EU split seems frighteningly possible, but what will this mean for Britain’s homeowners?
The vote on the brexit referendum is less than 11 weeks away and polling data suggests that the leave/remain camps are split. Where once a British exit from the EU seemed highly unlikely, it seems now issues are mounting in favor of the leave. Recent revelations on David Cameron’s questionable finances and public outcry concerning the lavish pro-EU advertising campaign have both served to weaken the government’s stance on staying put. The result of this week’s Dutch referendum has done them no favors either, and with many anti-EU campaigners still looking to raise-the-drawbridge on the Syrian migrant crisis, it would seem that Brexit presents a very tangible outcome.
The problem is that if the UK votes to leave the EU, Britain’s substantial trade deficit could very well cause a run on the pound, forcing banks to hike up interest rates, in an attempt to stem the decline. The upshot? Mortgages would become more expensive and house prices would fall. UK homeowners would see a drop in the value of their property and any potential withdrawal on equity would be halted. The drop of in market value could be further exacerbated if Britain is able to exert greater control over its borders, as a reduction in migrants would spell a decline in the demand for housing, slowing the rate of increase in house prices, or even creating a drop. Reductions in building restrictions and pressure on house prices could further spell trouble for homeowners.
Of course, this softening in market value is merely speculation, but since David Cameron announced the referendum for June 23rd the rate of British sterling has already dropped by a 20%, and lenders have subsequently reported a surge in mortgage enquiries (as high as to 30%), as apprehensive homeowners look to obtain a more secure rate.
The bottom line?
Mortgage holders are now faced with a choice, look to switch policies and obtain a fixed price to protect against a possible spike in interest rates, or take a chance that the market will remain stable and continue with a cheaper variable rate. Whatever the decision, it is crucial that those looking to make a move within the next few months speak to a professional financial advisor.
Worried about potential interest rates rising? You could consider remortgage your existing property. Speak to Taylor-Hall. Simply click the link here to put forward any queries, or contact us on (0191) 581 9018 for a free financial consultation.