What is Brexit?
Brexit refers to the UK leaving the EU. More than 17 million people voted to leave in a referendum in June 2016.
Date of Brexit
The UK left the EU on 31 January 2020. It is still following EU rules, and its trading relationship is the same.
This transition period is due to end on 31 December 2020.
The EU is an economic and political union with 27 countries, and the UK is the first to leave.
The rocky road to Brexit
A bill was approved by the House of Commons in September but met strong resistance in the Lords.
Peers voted by 367 to 209 to amend the Internal Market Bill, after claims that it would allow the UK government to ‘shackle’ devolved administrations as powers are returned from Brussels.
And they voted by 327 to 223 to limit ministers’ powers to rewrite parts of the bill at a later stage.
The proposed law aims to create a UK-wide internal market after the Brexit transition period ends on 31 December 2020.
There are increasing fears about how the food chain could be affected after 31 December.
Police chiefs have warned that a no-deal Brexit could damage their ability to fight crime.
UK Prime Minister Boris Johnson and President of the European Commission Ursula von der Leyen concluded talks on Christmas Eve, just a week before the transition period will end.
They have reached a historic agreement that will replicate many – although not all – of EU members’ economic benefits.
The deal now must be ratified by UK MPs, who are expected to vote sometime next week.
Had we crashed out of the transition period without a deal, this would have seriously affected the UK economy. The knock-on effects of unemployment, food prices, the housing market and more could have been devasting.
The certainty of a deal offers more stability – but that is not to say financial markets will be entirely unaffected.
How will Brexit affect house prices?
In June of 2016, the very month of the EU referendum, the average UK house price stood at £212,887, according to the Office for National Statistics (ONS). That was an 8.2% rise from the year before where the average house price was £196,802.
The trade deal reached today hailed by Boris has doused fears of no-deal Brexit resulting in crashing house prices, and short-term disruption.
This is excellent news for potential buyers and sellers, who are already facing a chaotic housing market due to COVID-19.
The government’s stamp duty holiday expires in March 2021, and then the furlough scheme will wrap up just a month later.
This is likely to result in unemployment peaking and a later downturn in UK house prices.
The housing market has surprised us all thus far, however, nothing is certain. Some property experts believe the COVID-19 vaccine will give people confidence, making considerable investments more likely.
Will Brexit affect mortgage rates?
Mortgage lenders usually use the Bank of England’s base rate to decide
how much interest they charge on a mortgage.
Due to the COVID-19 pandemic, the Bank of England’s base rate is currently just 0.1%. This is to stimulate the economy.
If Brexit causes the pound to drop the BoE may act swiftly and increase the base rate. This would increase the interest borrowers pay on their mortgage.
However, with the global pandemic and world economies struggling, the BoE is unlikely to do this.
Is now a good time to buy a home in London?
The stamp duty holiday and low-interest rates most definitely have led to a surge in house buying. To buy or not to buy that is the big question. Is it an excellent time to buy or is the housing market bubble about to burst?
This does depend ultimately on how well the UK economy performed.
What does a Brexit deal mean for house prices in the UK?
Experts have been divided for some time now on what Brexit will mean for house prices.
Despite the coronavirus pandemic and Brexit, the UK property market largely remained resilient. Due to the stamp duty break. The latest Halifax tracker showed typical house prices rose from £237,834 to £253,243 between June and November – the strongest run of growth since 2004.
What will happen to the UK house prices largely depends on how the UK economy performed.
Will Brexit make house prices fall?
No one knows for sure: the necessary costs for shopping and bills may go up. This will, in turn, affect a household’s ability to pay the mortgage.
The second national lockdown followed by the end of the furlough scheme looming. Will mean buyers need to be ready to deal with short-term trials in return for potential longer-term gains.
Source: British Landlords Association
Author: Simon Hampton
Date: 24th of December 2020
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