AMI warns of post-Brexit mortgage rate rise

AMI warns of post-Brexit mortgage rate rise

The Association of Mortgage Intermediaries (AMI) has said a no-deal Brexit would cause mortgage rates to rise and houses prices to fall. 

The trade body said this was because the cost of UK bank finance would rise and create a knock-on effect on mortgage rates.

In its quarterly economic bulletin out yesterday (22 October) the trade body alleged the ongoing lack of resolution on Brexit was creating an economic reality harsher than admitted by the Bank of England. 

The AMI said preparing for the worst may be necessary. It said though Mr Carney may not have intended to "stir up the storm" with his remarks that a no-deal Brexit could cause a drop in property value of 30 per cent, he was right to sound a "warning bell".  

Mr Carney said in September that failure to reach a deal with the EU could trigger a collapse in house prices in a worst-case scenario.  

Following a summer which lacked the usual bump in property purchase activity, the AMI noted Brexit uncertainty was already being felt across the market with margin pressures for lenders showing little signs of abating.

It also warned mortgage approvals and purchases were likely to "stumble" if the government does not extend its Help to Buy scheme past 2021.

The Help to Buy Equity Loan scheme offers borrowers a government loan of up to 20 per cent of the cost of a new-build home, interest-free for the first five years.

The AMI observed the government had so far remained "tight-lipped" about the future of the equity loans but warned without the scheme new build loan-to-values were likely to fall back again and a drop in purchases and approvals would put more pressure on the remortgage market to support lending.

Last week Mr Carney suggested the Bank of England could loosen its capital requirements and free up banks to lend as much as £300bn more into the economy in the event of a no-deal Brexit

Speaking to the Economic Club of New York late last week, the Bank's governor said he deemed a no deal Brexit with no transition period "unlikely" but warned the Bank needed to prepare for the outcome.