Will Mortgage Rates Go up after Brexit?

Just days before Brexit, there is a lot of uncertainty. As the United Kingdom leaves the European Union, there will be a lot of different things to figure out. One of the moving pieces that the country has to keep in mind is that mortgage rates will probably be affected. At the moment, mortgage prices are at an all-time low. It depends on whether the UK chooses to stick to EU regulation or if the country will go its own way. If the country decides to leave EU regulations behind, homeowners could face a mortgage market that is changed by the transition.

Changes in the Market

Some changes could have Britain stop adhering to the EU mortgage credit directive, which has rules to protect consumers. These rules have been blamed for creating “mortgage prisoners.” This happens when homeowners become trapped with their current provider. Paying over the odds, they wouldn’t be able to pass affordability tests applied by other banks. While homeowners haven’t preferred these EU rules, which could be eased once the United Kingdom leaves the EU. Prime Minister Boris Johnson has expressed a desire to weaken the mortgage rules. Last year, the average five-year fixed rate deal for those with small deposits dropped.

EU Rules

There has been an explosion the number of deals available since the EU rules were introduced, despite the fact that homeowners have been finding themselves stuck in mortgages. With these rules, mortgage prices have gone down. A homeowner with a 100,000 pound mortgage at £656 for 20 years. Today this would cost £527.

Five-year fixed rate mortgages have more than halved. In addition, 10-year fixed rate deals have dropped from 5.74 percent to 3.02 percent. Since 2017, mortgages have gone down a lot. An average rate that lasts for two years were around 2.35 percent. Since there has been a price war between mortgage lenders that have begun to show consequences, lenders half the market according to the site MoneyPug, which is known as a platform to find a mortgage broker.

Competition in the Market

With the change in regulations, there will likely be less restrictions. Boris Johnson has already declared his intentions, which may or may not be good for the market. It is likely that lenders will return to their bad habits, which could allow for people to get mortgages easier but sometimes at the homeowner’s expense. There has been a decreased rate of 0.25 percent to twice that over a year. 43 percent of homeowners had a tracker mortgage. Many people get into the market hoping that they can make money off the inexpensive mortgage rates.

Mortgage Rates & the Future

Mortgages are a complex web of lending costs and rates. The market has changed since the EU rules, and banks have done the same. With a loan-to-value at 90 percent, mortgages are at their highest since 2008. Borrowers taking out mid-range deposits have increased over the last year. Borrowers will provide a deposit of 25 percent, the share of these loans are within the smallest bracket of deposits.

The term lengths of mortgages are changing. Borrowers will provide a deposit 0f 25 percent, the share of these mortgage loans being handed out are within the smallest bracket of deposits. Term lengths are also changing, and increasingly borrowers are moving on to long-term deals that are easier to pay off. 92 percent of all new mortgages have taken off according to the Bank of England.

While it is difficult to know exactly what will happen in the future, but with Brexit becoming official there will be a lot of changes in regulation. The government will likely make it easier to get mortgages, competition will go up, and prices will probably continue to go down.

The chances of mortgage prices will probably not go up, but this isn’t not necessarily a good thing. Lenders will return to more risky behavior, at the borrower’s expense. It is possible to end up owning more than the home is worth. If you do your homework and work towards paying off your mortgage right away, you may be able to take advantage of the competitive prices without over-paying in interest.