MortgagesDec 8 2016

Brexit's effect on housing ladder

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Brexit's effect on housing ladder

Brexit - whether it will be hard, soft or dirty - has dented confidence in the UK property market, if not quite sales.

Latest statistics from organisations such as the National Association of Estate Agents (NAEA) suggest it is very much a buyers' market - particularly among first-timers. 

The organisation's latest sales statistics for October 2016 show 32 per cent of total sales made in the month were to first-time buyers.

This represented a 9 percentage point rise on September and, according to the NAEA, is the highest numbers since the organisation began collecting records in 2000.

Moreover, Roland McCormack, mortgage distribution director for TSB, says: "After the European Union referendum, we saw some mortgage borrowers and customers pause for thought, but we found that confidence quickly returned.

"For example, this summer, we saw a significant increase in mortgage activity at TSB."

Mark Hayward, managing director of the NAEA, comments: "Our findings over the past few months indicated mild uncertainty immediately following Brexit, and in September, we even saw sales to first-time buyers (FTBs) fall.

"After shrugging off the uncertainty, we have seen an increase in supply and a rise in the number of sales to first-time buyers in October - proof the market is beginning to bounce back."

Figure 1: Sales to first-time buyers since October 2015 (Source: NAEA).

The UK's vote to leave the European Union back in June this year caused some consternation among would-be buyers, which has now dissipated, according to Mr Hayward.

But is he right that first-time buyers have completely shrugged off Brexit concerns?

Not entirely, according to other respondents to this guide, who claim there are more concerns on the horizon, over the prospect of mortgage rates eventually rising, low wage growth and the unknown quantity of the effect of the triggering of Article 50 in spring next year. 

All these could have longer-term negative effects on the market for first-time buyers in the UK.

Confidence

Robert Sinclair, director-general of the Association of Mortgage Intermediaries, says consumer confidence has been the biggest area of concern.

He says: "The biggest impact of Brexit has been to consumer confidence. While the new build market appears to be unaffected, it appears the case that lenders still have the same capacity and appetite to lend."

For John Phillips, group operations director of Spicerhaart and Just Mortgages, there is no definitive "Brexit effect" on first-time buyers but there is a lack of confidence.

He explains: "Although buyer confidence is bouncing back from the Brexit blues, it is clear the confidence factor is affecting first-time buyers.

"This has been fuelled by speculation in the media as to what will happen in the future, and this has ultimately made some first-time buyers even more wary of buying a property."

David Hollingworth, associate director of communications for London & Country, comments: "Uncertainty is the key word and the immediate aftermath of Brexit saw some nervousness in the market.

"However, that has recovered strongly as mortgage rates tended only to improve. Of course there is a long way to go yet and uncertainty around prices and interest rate movements may not be far beneath the surface."

Interest rates

Within a few weeks of the post-Brexit vote market volatility and slide in Sterling to a 168-year low, Mark Carney, governor of the Bank of England, announced the first base rate drop in seven years.

So far, the low bank base rate of 0.25 per cent has been met with some promising deals - such as a 1.84 per cent five-year fix through Coventry for Intermediaries - but as Mr Sinclair says, rates are starting to "creep up a little". 

However, he adds these have not "moved enough to freeze potential borrowers out of the market."

Careless talk

Yet according to Donna Hopton, founder of broker forum Cherry: "The general view from brokers is that it has not yet had much effect on first-time buyers' ability to get onto the housing ladder. 

"There is certainly much talk, but as yet people just seem to be getting on with their lives regardless."

This is the view of Jeremy Duncombe, director of the Legal & General Mortgage Club, who comments: "Despite speculation, the ability of first-time buyers to take their first step onto the housing ladder has not changed dramatically [since the vote to Brexit].

"For the majority of first-time buyers, it is very much business as usual. We haven't seen the panic among lenders that some people had predicted, and the market remains much as it was in the lead-up to the referendum."

simoney.kyriakou@ft.com