Brexit:should you proceed with a house purchase - or sale - if interest rates are going to be cut following Vote Leave?

Mortgages guru Ray Boulger answers burning questions for homebuyers who are mid-transaction during the post-Brexit uncertainty.

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You’ve found your dream home, had your offer accepted, secured your mortgage and maybe even exchanged contracts. But then Britain voted for Brexit and suddenly what seemed last week like a solid investment for your family and future now seems less reliable.

Plus, this afternoon Mark Carney, governor of the Bank of England, signalled possible interest rate cuts, saying some monetary policy easing will likely be required over the summer. All of which will impact on mortgage costs and could give you the opportunity for a better deal.

Should you pull out? We ask Ray Boulger, of John Charcol mortgage advisers, for his opinion. He's optimistic about the housing market during the uncertain months until Britain exits the European Union...

Should I delay?

“Clearly if you’ve exchanged contracts there’s nothing you can do without incurring massive penalties,” Boulger says. “But if you haven’t got that far then it might be worth waiting to see if, as expected, we’re going to see mortgage rates coming down in the near future.

If so, you could possibly renegotiate your mortgage to get a better deal. Around 80 per cent of mortgages are fixed-rate but if interest rates remain as low as expected then it has never been more affordable to have a tracker mortgage.

Some lenders have fixed parameters and others allow you to change if you pay an arrangement fee. The situation is different mortgage to mortgage but I’d advise you to keep in touch with your broker and to find out what deals exist and how much it might cost to renegotiate.

If rates fall a quarter point or so, which I think is quite likely, and your lender doesn’t respond to the rates but others have and are offering better deals, I’d advise changing.

However, this will take some time as you would have to get another valuation and would need to factor in the cost of that in terms of what you might save over the longterm."

Will I pay over the odds if I buy now?

“I don’t think there’s going to be a very big impact on house prices,” Boulger says. “But there’s definitely going to be uncertainty and fewer transactions in the coming months.

We’re likely to see some small falls over the next few months but not moving into negative year-on-year territory.

This might actually be a good thing as it gives you more buying power and potentially the opportunity to try and negotiate a better price.

I’d advise people who have been looking for a property for a long time and finally found one they want to just go for it because I don’t think property prices are going to fall dramatically.

But if you haven’t been looking long and there’s plenty of choice in your area then you have more margin for bargaining.

However, you might find that the vendor is prepared to wait and find a buyer at the price they want."

How much of a hit is the economy going to take?

“Nobody knows for sure - if you think it is going to take a big hit then you’re expecting it to affect house prices. But we’ve got two years to negotiate this and I find it very hard to believe that the EU would try to punish us,” Boulger says.

Ten-year gilt yields have fallen below 1 per cent which means lenders have scope to cut rates.

So unless lenders get more nervous about lending – and I don’t see why that would be the case – that’s not going to affect cheap mortgages for people with big deposits.

But it might affect the amount they will lend to those with small deposits, such as first-time buyers. The Government is very keen to help first time buyers so it could always extend the Help to Buy scheme which is due to end this year. 

Also, if the markets are going to slow down in terms of activity then mortgage lenders will need to be more competitive, especially as I don’t see lenders cutting their lending targets.”

Will the property market stall?

“No and especially not in London as overall demand for property is not going to fall,” Boulger says.

They might have joked about it but people are not going to emigrate just because we’ve voted to leave. And in the months prior to the UK actually exiting the EU I can foresee a quite substantial increase in immigration from the EU, as people rush to beat the deadline.

So if you take a two-to three-year view you can see that demand is going to increase.”

Ray Boulger is an expert on the mortgage industry and housing market, speaking regularly on the BBC, Sky and ITV.

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