All things considered, it’s probably fair enough that the news has been dominated by the question of what Boris Johnson’s election victory means for Brexit. It’s probably also fair to say that Brexit will have a huge influence on the UK over the coming years, if not decades.
It is, however, also important to note that Brexit is only one issue among many. The economy in general and the housing market, in particular, are also key issues for UK residents and while they will almost certainly be influenced by Brexit, they will also be influenced by various other factors, not least of which being government policy and practice. With that in mind, here’s a quick overview of what the election could mean for mortgages.
The Brexit issue
Having just said that Brexit is only one issue among many, there’s no getting away from the fact that it is likely to be a very important issue. Given that the Conservative win makes a hard Brexit massively more likely, it’s probably safe to assume that this will have an adverse impact on the Pound, at least over the short term. This assumption can be supported by a look at the way the currency markets have reacted to Brexit-related news and, in particular, the way the Pound has dived since it was announced that Boris Johnson intended to try to make it illegal to delay Brexit any further.
In and of itself, a weak Pound is bad news for some and good news for others. It does, however, have the potential to push up inflation and if that happens there will be one of two outcomes. Assuming that the government sticks to the current rules on inflation (i.e. a target of 2% with a 1% margin of error either way), this would effectively force the Bank of England to raise interest rates, which, of course, is bad news for borrowers. That being so, borrowers might want to look for a fixed rate, possibly a longer-term fixed-rate, to give themselves reassurance.
Any remortgaging decision should be taken with care and not just because there tends to be quite a bit of upfront expense and paperwork. Fixed-rate mortgages can be relatively expensive, partly because they are still something of a niche market and partly because they essentially combine two products, a mortgage and an insurance policy. At the same time, however, while there is a limit to how far interest rates can drop (unless you believe the government would use negative interest rates), they can rise indefinitely.
The affordability issue
Whatever your views on Brexit, hopefully, you will benefit from the fact that the saga appears to be coming to a close and that, one way or another, we can all move on. As is always the case in life, this is likely to be easier for some people than others. For example, people in professions for which there is high demand globally may feel confident about their ability to “keep calm and carry on”, whereas other people may feel rather more vulnerable.
If you already own your home and are having concerns about how to pay your mortgage over the long term, then it might be a good idea to speak to a professional financial adviser. They might be able to help you find options you might otherwise have overlooked, which could be anything from taking advantage of the rent-a-room scheme to looking for a mortgage product with some degree of flexibility, such as an offset mortgage.
If you are looking to buy your first home and are concerned that Brexit could make it harder for you to get a mortgage, then you may want to look at products such as the Lifetime ISA and/or the Help-to-Buy scheme, to see if they could make it easier to build a substantial deposit and thus increase your attractiveness to lenders.
Your home may be repossessed if you do not keep up repayments on your mortgage.