Could a ‘Brexit’ affect the mortgage industry?
Referendum. The word on many people’s lips across the nation, as we all weigh up the pros, argue over the cons and get ready to make our vote on whether the UK will remain in the European Union. But how could a potential ‘Brexit’ affect the mortgage industry? It is a question some are beginning to ask, and the answers may come quicker than we think.
House prices Opinion is split on how a Brexit could affect house prices. On one hand, demand has a strong influence on property value in the UK, and a yes vote could indeed cause a decrease in prices as people worry about the possible effects of a Brexit on house prices. An increase in inflation could also be the result of a Brexit, with some experts suggesting this may reduce demand dramatically. But other experts highlight that the UK’s infatuation with property will continue to drive the market. Hidden factors such as the possible reduction in available labour that free movement brings could also stall house building further and push up prices.
Capital investment Much of the house price issue in London comes down to market conditions, which are beginning to see a possible dampening as supply begins to catch up with demand at the high-end of the market. But the core issues show no sign of stopping as more buyers are pushed out of London due to affordability, supply and competition from investors, both foreign and domestic. Most experts predict these problems will continue in the Capital over the next few years, whether we are in the EU or not. If anything, a weaker pound could make foreign investment more attractive, a possible side effect given the recent reaction to the referendum build-up.
Consumer confidence Confidence can have a dramatic effect on the market. We all know too well the recent impact a sharp drop in surety can have on lending and finance. Leading up to the referendum, as the media and politicians wrestle to get their voices heard, we may indeed see a change in both borrowing and lending. We have already seen the effects of even speculating on a Brexit, with the pound plummeting against both the euro and the dollar and the stock markets moving in response. This suggests that even talk of leaving the EU could affect how people borrow, buy houses and how much they pay for them. Even if the real effect of a Brexit is minimal, the effect of the vote itself on consumer action could be much larger.
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