Potential for Brexit vote leaves mortgage rates at record low

 
Potential for Brexit vote leaves mortgage rates at record low [Photo: George Clerk/iStock]

The potential for a Brexit vote has been forecast as nothing but bad news for the UK's property market, with buyers and sellers likely to be negatively affected by the knock-on effects of the UK voting to leave the EU, should this happen. 

However, in the days leading up to the referendum on June 23rd, there has been a surprising side-effect of the Leave campaign taking a marginal lead in the polls. The pound dropped recently against the dollar, and money market activity since has meant that mortgage rates for five and ten-year fixed rate products have fallen to record lows. 

According to figures released by the Guardian and prepared by financial company Moneyfacts, the average rate buyers will face when getting themselves a five-year fixed rate mortgage has now fallen as low as 3.16 per cent, down from 3.18 per cent just one month ago, and from 3.34 per cent at the market's most recent peak in June last year. 

For ten-year fixed policies, the rate has fallen as low as 3.46 per cent this month, down from 3.49 per cent a month ago and 3.7 per cent last summer. 

Moneyfacts said the reason for falls in the price of mortgages has come from the fact that investors, afraid of a Brexit vote, have turned their back on riskier assets in recent weeks, instead looking towards safer purchases. This has meant yields on such products falling in the most recent weeks, which in turn sees mortgage rates drop, making it surprisingly cheaper for people to get onto the housing ladder. 

Andy Knee, chief executive of LMS, said that market conditions have meant more competition between lenders, which has pushed prices for borrowing down, adding that now is the perfect time for people to look towards remortgaging their home. 

“It is clear that many savvy borrowers are taking advantage of the current climate and we expect activity to maintain its momentum,” Mr Knee said. 

“With an uncertain economic climate, knowing what your mortgage payment will be for five years is a very seductive offering for many remortgagers.”

Even more surprisingly Ray Boulger, senior technical manager at mortgage broker John Charcol, said that for those who think a Brexit vote is likely, it may even be worth holding off until after the referendum to try to get a mortgage. Such a vote would mean even more investment in safer assets, which could potentially see fixed-rate mortgages become even cheaper again. 

But is it worth the wait? With the chancellor already having claimed that a Brexit vote would actually make it harder for people to obtain a mortgage, it's a risky game at the moment for buyers to bet on the outcome of the referendum, and while there has been a surprising positive from the recent wave of support for the Leave campaign, the fact remains that uncertainty is king at the moment in property, and when the country is so precariously balanced politically, the market tends to adopt more of a wait and see policy.