"We, and the market, will find a way but it is likely to take some time to travel through this tunnel and come out the other side."
The Bank of England has said it is "monitoring developments closely" and would take "all necessary steps" to support monetary stability. But what does this mean for the mortgage market?
Uncertainty seems to be the word of the day, with industry voices divided on what will happen next.
Richard Adams, Managing Director at the Stonebridge Group, said: “The uncertainty this Vote to Leave the EU delivers will undoubtedly affect the mortgage market. There are likely to be significant ramifications in terms of demand for purchasing property, and therefore securing a mortgage, at a time when demand has already dropped off. This will be further exacerbated depending on how the financial markets react, how lenders in turn react and in particular what might happen to rates in the future.”
He added that, as an industry, financial services had “very recent experience of a tough market, and pulling through hard times. We, and the market, will find a way but it is likely to take some time to travel through this tunnel and come out the other side.”
Grainne Gilmore, of Knight Frank, said the vote had “the potential to make a relatively swift impact on the housing market”, although she acknowledged that in the medium to long-term, the impact would depend on the negotiations made with the EU. This was echoed by BSA Chairman, Dick Jenkins, who urged politicans to ‘unite’ to set the framework for the economy to thrive.
Some were more positive about the resilience of the market, with Martin Walshe, head of Residential at Cheffins, saying:
“Whilst we will probably experience a short period of adjustment, the UK property market is incredibly resilient and investment in housing will remain a cornerstone of our market, whether we are a part of Europe or not.”
Former RICS Chairman Jeremy Leaf cited the ‘long established and sophisticated’ nature of the London property markets and said that would help the markets return to ‘some form of normality, whatever that means now, after an initial period of indecision’.
However, Richard Donnell, Insight Director at Hometrack, was less certain about the London property market’s future, warning that:
“The decision to leave the EU will be most keenly felt in the London housing market which is fully valued and already facing headwinds. History shows that external shocks can reduce sales volumes by as much as 20% with sales volumes already down over the last year. House price growth is already weak and running in low single digits in central London areas and modest price falls now appear likely in higher value markets as prices adjust in the face of lower sales activity. Even a sharp fall in the Sterling is unlikely to attract overseas buyers in the near term. “
John Phillips, group operations director at Spicer Haart and Just Mortgages, went as far to say that the vote would be a positive for the market in some ways, adding:
“We still have a chronic shortage of houses so I don’t think that house prices will drop or that people will stop buying or selling. What we still need is for house builders to up their level of building again, although this may stay depressed for a little while to come.”
Interest rates are a hot topic, with disagreement about what may happen - Grainne Gilmore of Knight Frank warned that mortgage rates could be become ‘detached from the base rate’, which said ‘may well be cut in coming weeks’. Jeremy Leaf, however, noted that:
“If inflation goes up, the Bank of England may be obliged to raise interest rates which will have an impact on the property market.”
However John Phillips highlighted that “the beauty trade wise is that in the next two years we have the best of both worlds, we will still be in the EU but we will also be able to start trading freely with the rest of the world. There are already calls for referenda in other EU countries, so in the next two years the EU is likely to look like a very different place.”
