Will there be a Brexit Mortgage increase?1st April 2016
Will an exit from the EU lead to higher mortgage rates? Chancellor George Osborne thinks so. The money markets hate uncertainty and any perceived risks to the economy can cause the cost of credit to become unstable. Asked if he thought the cost of mortgages would increase if Britain were to exit the EU, Osborne said, “The short answer is yes. I think that is likely, but I’m not in charge of mortgage rates.” However, it is worth remembering that Osborne is one of the leading advocates of the ‘Britain Stronger in Europe’ campaign and so there will likely be strong political motives for wanting to get this message across.
On the other side of the coin many city economists have said that they expect the Bank of England to lower interest rates if we exit Europe, in order to avoid panic and to ensure continued public spending. Since the biggest influence by far on mortgage rates is the base rate of interest set by the Bank of England, this would reduce pressure on mortgage lenders to increase their rates. A Reuters poll (April 2016) found that 17 out of 26 economists working in the city thought a vote for Brexit could prompt the Bank to cut interest rates. However, even if this majority is right, it can’t completely guarantee that lenders won’t still up their mortgage rates.
So is now a good time to secure a fixed mortage? The lowest mortgage rates of below 1% seem to have stopped in early 2016. This could be to do with caution over the approaching referendum, or disappointing forecasts about the global economy at the end of last year. However, it is certainly likely to have been impacted by the fact that fixed rate mortgages are making discounted variable rates no longer seem so attractive. So whilst these fixed rates are still so low, now could be a good time to secure one. The only risk is whether interest rates fall even further. With so many uncertainties about Britain after the referendum, only time will tell.
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