How is Brexit affecting the housing market?

The post-Brexit housing market

In October last year as the Brexit transition deadline loomed we questioned whether Brexit would affect mortgages within the housing market, especially with the prospect of no deal. 

Whilst Brexit has been somewhat overshadowed this past year by the immediate threat of COVID-19, we are now at the end of the transition period and are independent of the EU. Although we are still dealing with the impact of the pandemic, on the Brexit front we are seeing changes on a national level everywhere as we get to grips with no longer being a part of the EU.

So, what predictions do we have on mortgages this year following the transition and how has Brexit affected them.

What’s the current situation with the housing market?

We know that there are multiple factors that can affect house prices and have an impact on your mortgage options. The ones we want to pay attention to most are house prices and interest rates which will, in turn, be affected by the current state of the economy and Brexit.

What we also know is the market has changed since the 2016 vote. Where housing prices started to slow, they picked up in October 2019, and by December 2019 transactions had improved.

However, the impact of Coronavirus in 2020 meant that the housing market was shut for 7 weeks and lenders pulled their low deposit (higher risk) mortgages, meaning that where we saw improvements in the housing market the data got somewhat skewed while we dealt with the effects of the pandemic.

What do the current statistics say?

According to the HMRC UK monthly property transactions commentary, since the re-opening of the market residential transactions have increased month on month reflecting the relaxation of restrictions. In December 2020 transaction estimates stand at 129,400, 31.5% higher than December 2019 and 13.1% higher than November 2020.

Furthermore, as of November 2020, the UK House Price Index puts the average house price in the UK at £249,633, that’s an increase of 7.6% compared with the previous year.

Why is it then that we are seeing these changes, especially while we’re amid a pandemic?

Property prices and transactions are being pushed by the government announced stamp duty holiday (in place until March 2021) put in place to get the market moving which had been hit by lockdown, as well as to help potential buyers who had taken a financial hit during the Coronavirus crisis. Buyers are therefore eager to exchange to take advantage of this tax cut.

According to Rightmove, the average time it’s taking for sellers to secure a buyer is 57 days compared with 76 days in January 2020.

However, according to their January 2021 report, the average price of property has come down by 0.9% as we see sellers trying to squeeze in a sale before the stamp duty holiday ends in March.

One main driving force in the housing market price stability has always been interest rates. In the wake of Brexit, we became concerned over the prospect of changes to the Bank of England’s base rate and the uncertainty it would bring for buyers and sellers.

In 2016 the Bank of England dropped its base rate to 0.25% to head off any potential recession in the wake of the EU referendum. We had since seen a slow rise to 0.75% only for it to be dropped to 0.1% during the pandemic to support the economy.

As we can see the data and trends have been somewhat muddied over the last year, so where does that leave us for 2021 now that Brexit deals have been agreed and we are out of transition?

2021 Post-Brexit Predictions

The impact of the pandemic is certainly the at the forefront of thoughts with Brexit a close second.

It’s difficult to say how Brexit will impact the housing market and mortgages but house prices are unlikely to be impacted in the short term as we recover from the pandemic. The sector is more likely to be affected by the country’s economic recovery from the pandemic i.e. job uncertainty and mortgage availability.

As house prices rose in 2020 mainly driven by the stamp duty holiday, it makes it difficult to see what they will do in 2021. We won’t know if the stamp duty cut has been of benefit yet due to the rise in house prices which may have negated the gain from the stamp duty holiday, as well as the shortage of low deposit mortgages. Questions remain over what will happen to property prices when the tax cut finishes in March.

2021 has many uncertain factors which could change the course of the market. A possible extension to the stamp duty holiday, how long the pandemic will last, how businesses behave post-pandemic, unemployment as well as how the economy recovers are all variable uncertain factors that could impact us this year.

However, if the end of the Brexit transition period does have an impact on the broader economy, we could see effects on activity. For instance, if Brexit causes significant job losses it could lead to a slight drop in prices. According to Halifax, their predictions are for house prices to fall this year by as much as 6%. The reason that fresh national lockdowns and an increase in unemployment are likely to be the cause. However, Zoopla expects to see an increase in prices by 5% in the first quarter slowing to 1%.

The furlough scheme is also due to end in April which is when we are expecting to see the highest unemployment rates, so we expect that transactions are likely to drop around this time.

There is a lot of uncertainty still around how the Brexit deal will impact the UK’s housing market and with the impact of the pandemic, we will be waiting to see what happens. However, we believe that the market will likely remain resilient.

What we do know:

  • Mortgage product availability, including smaller deposit mortgages, are slowly starting to make an appearance again as lenders gain confidence.
  • Homebuyers have re-assessed their property needs during the pandemic so pent up demand for home moving is likely to still be high on the agenda.
  • Due to the current low-interest rates set by the Bank of England, there are plenty of competitive deals on the market.

Rather than trying to guess the economic shifts, it may be simpler to focus on your own finances.

We don’t have a crystal ball and a professional mortgage adviser won’t have all the answers. They will, however, be able to explain your mortgage options and compare thousands of deals to help you navigate this period of uncertainty.

Contact us at Online Mortgage Guru on 0345 3669799 or email us via and we will put you in touch with a suitable specialist to handle your enquiry who has experience handling cases such as yours.

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