Brexit
In June, following a bad-tempered debate, came the UK’s decision to leave the European Union. There have been all kinds of dire predictions as to Brexit’s potential effect on the mortgage market. The BoE moved to shore up financial and economic stability as the result became clear. One of its first responses was to cut the base rate from 0.5 per cent to 0.25 per cent, and implement quantitative easing and a term- funding scheme.
But, as the Council of Mortgage Lenders (CML) points out, the housing market is fairly well insulated from the potential effects of Brexit, most of which have not materialised in any case – for now at least.
That said, although low lending rates persisted into the last quarter of 2016, but the number of property transactions was subdued in the second half of the year. First-time buyers (FTBs) and home movers continue to be subject to affordability pressures.
This, combined with no let-up in potential demand and a low rate of new build homes, means house prices are likely to continue to rise, albeit slowly, over the next couple of years.
Homeowners remain reluctant to sell, but overall the CML forecasts weaker growth in 2017 than in 2016, largely due to the uncertainty around Brexit. Table 1 shows the CML’s forecasts for 2017 and 2018.
