How will the Brexit deal affect Ceredigion mortgage rates?
The UK has left the EU. The UK government and the EU have now agreed a deal on their future relationship, how has this affected Ceredigion and mortgage rates?
In April, the market will also be dealing with the end of the Stamp Duty Holiday, which is due to come to an abrupt halt on the 1st April 2021. Consequently, we will continue to see the house price index's show growth in the first half of 2021. They will then recede as the purchase prices of Ceredigion homes purchased after the 1st April 2021 reflect the lower price paid (because buyers would have had to pay for their Stamp Duty again). Therefore, probably by the end of 2021, the Halifax may be correct, and Ceredigion house prices will be 2% to 5% lower than they are today, simply because of the stamp duty.
What will happen to mortgage rates?
The real benefit from the Brexit deal is that there will be no tariffs on most goods coming into the UK. 52% of all goods imported into the UK are from the EU (totalling £374bn per annum). The UK Government were planning to add between 2% and 10% tariffs under World Trade Organisation rules on the vast majority of those goods. Price increases because of those tariffs would have fuelled inflation, meaning the Bank of England would have to increase interest rates. Although 77.2% of British mortgages are on fixed rates (paying an average of 2.16%), eventually those increased Bank of England rates would have fed through into higher mortgage payments. To show you how vital low-interest rates are
The average Ceredigion homeowners’ mortgage is £323.76 pm, owing an average of £131,997
Yet if interest rates rose only 1.5%, Ceredigion homeowners’ monthly mortgages payments would rise to £488.76 pm, and if interest rates were at their 50-year average, then the mortgages payments would be an eye-watering £951.84pm.
As we have mentioned many times in the articles we have written about the Ceredigion Property Market, low-interest rates are vital to ensure we don't have a property market crash. That's not to say just because they are at an all-time low of 0.1% to aid the economy that there won’t be some form of realignment of property prices later in the year (as mentioned above). Yet low-interest rates mean people can still pay their mortgages, so there won't be panic selling. That would mean there won't be a flood of property come to the market (like there was in the 1988 and 2008 property crashes when interest rates were much higher), suggesting property prices should remain a lot more stable.
Thank you for reading.
Best wishes,
The Alexanders Team.