As the UK digests the ‘Leave’ vote following the EU referendum, it’s fair to say that behind the scenes the financial world has been busy understanding the consequences. Henry Knight, director, Springtide Capital addresses some of the main concerns within the mortgage market.
Henry Knight, Managing Director at Springtide Capital sends a message of reassurance,
“We are clearly in for a period of uncertainty whilst the markets rebase themselves. However, I’d like to express my personal opinion that although there may be a small correction in house prices, this is set against the fact that we have been in a market with continual price increases. Therefore, the rational outcome would be for an overall flattening of the annual rate as opposed to great reductions. Buying a home or even an investment property in most cases is a long-term decision, not one based on growth over a short period.”
Henry has also highlighted that it is unlikely that the base rate will increase, with Bank of England’s Mark Carney recently stating that quantitative easing would be back on the agenda to sure up the economy if required – potentially lowering rates even further to stimulate or stabilise.
We can, however, expect some tightening in lending, which may mean that 95% loan-to-value (LTV) deals aren’t as competitive. It’s also likely that banks will continue to seek out clients at 60-70% LTV, where pricing can be expected to remain strong.
Henry continued by saying that, “Liquidity within the banks was significantly bolstered following the last financial crash, ensuring that banks are in a far more secure position to withstand this type of event. Therefore, it would seem reasonable to assume that it shouldn’t be a major issue unless there was a very significant market drop over a sustained period (25%+).
We appreciate that uncertainty is always unsettling, especially if a person is in the process of selling or buying a property, but we’d encourage everyone to take a longer term view.
If you read ten different press articles, you’re likely to receive as many different views on the topic – many experts are making educated guesses at best, therefore kneejerk reactions are not recommended. In fact, many mortgage holders are likely to be able to take advantage of cheaper mortgage rates in the coming weeks as banks will continue to have an appetite to lend.
Moreover, it will take time for the full consequences of a ‘leave’ vote to be revealed and for the government to begin to pave the way for the future – we have to be patient.
Please feel free to speak to one of Springtide Capital’s qualified Mortgage Consultants for further information and guidance on 0203 0404400.