Last week, the UK voted in an unprecedented referendum, one which saw more voters turn out to vote than there has been since the 1992 general election. We voted to leave the EU, a move which has cast all the markets of the UK into a haze of uncertainty, including the housing market.
In post-referendum reports, it has been said that older voters cast their ballots in their masses to vote to leave, whereas the age groups of the average first-time buyer wanted to remain. The future of homeownership will be impacted, either for better or worse, by the leave.
In May 2016, HM Treasury estimated that two years after a vote to leave the EU, GDP would be lower by 3.6 per cent in the UK, but that house prices will be 10 per cent lower.
Falling house prices should be a worry for homebuyers, first-timers or not. Should someone purchase a house now and house prices fall around the country, then that person would be put into an immediate negative equity, which means they would not be able to pay off their mortgage by selling the home – risking their future finances.
On the other hand, falling prices mean that more first time buyers will, hopefully, be able to afford to own a home for the first time. The uncertain market may help the millions of young people trapped living with their parents, or stuck in the renting trap, to get out.
Overall though, property professionals have reported that during the aftershock of the surprising vote, which has even seen the resignation of the Prime Minister, that home buyers are seeking to renegotiate prices, or are even pulling out of deals.
Rightmove reportedly said that interest in homes in Edinburgh shot up by 250 per cent on Friday morning, the day after the vote. This is put down to people wanting to move to a country that wants to stick with the EU.
Overlaying all of this is the issue of a housing shortage, which is propping up house prices, and the Bank of England, and what it will do with the base rate. It has previously sat at a 0.5 per cent for a surprisingly persistent length of time. However, in order to protect the pound sterling, it is expected that the BOE will cut this base rate, for what is largely predicted a 25 point cut. This will have a wide spread impact on mortgages, loans, and savings.
If you are looking to purchase a home, make sure you consult thoroughly with your bank and consider what all the costs may add up to.