2019: The year of Brexit and its impact on the mortgage market

2018 has been a relatively flat year for the housing and mortgage markets. Consumer confidence has been hit by the uncertainty of the Brexit negotiations, house prices have plateaued in some parts of the UK, and the Bank of England Base rate has increased to 0.75%. The number of mortgage holders remortgaging hit new heights and the Government extended the Help to Buy scheme to 2023.

Whilst it is tricky to predict what might happen in 2019, I have outlined some thoughts on what might be in store, based on what we know now. What is clear is that Brexit will have an impact.

Housing Market: Prices to continue stabilising and consumers to take stock

House prices are expected to continue stabilising in London and the South East, where confidence has taken a hit and housing transactions have fallen back. However, house price growth for the UK is expected to continue but at a slower pace.

Total transactions should fall just under 1.2 million home sales, which is the slowest year since 2013, but far more active than the years following the market crash in 2008. Some people have been putting off the sale of their property until the UK leaves the EU on 29 March. There could be more activity post this date, but much depends on the type of deal the UK leaves with. Those that do need to move home are doing so.

The hottest property markets in the UK are Edinburgh, Glasgow, Cardiff and Northampton, where properties are selling far more quickly than in London. Don’t discount the London market yet, though. According to research from JLL, the London market could jump as much as 17.6% between Brexit and 2023.

Mortgage market: Rising interest rates mean competitive mortgages

With interest rates expected to remain low, the number of people remortgaging looks set to remain high for another year. It has been a competitive year for mortgages, and 2019 is set to be no exception – 40% of mortgages (approximately 2,007) do not have arrangement fees, and that percentage is only set to rise. Expect to see lenders continue to fight each other for market share by offering competitive deals for new and current customers.

There has been a rise in popularity for five and 10-year fixed mortgages, and lenders could look to offer more of these types of products as people look to lock into a rate for longer. This summer alone, the number of applications for fixed-rate mortgages rose 3.4%. A good Brexit deal could lead to the Bank of England increasing interest rates to circa 1%, whilst a bad deal could see interest rates slip back over the next 12 months. If you are coming to the end of your current mortgage deal next year, speak with a mortgage broker about your options.

Technological advances: The world becomes more digital

2018 saw a big increase in the number of fintech and proptech companies entering the market, with the aim of making the homebuying and mortgage sourcing process more efficient. Mortgage lenders and property companies are investing significant sums in their technology and digital capability. Expect to see some of the bigger lenders launch new platforms for the online mortgage process, to better assist customers and enable them to take more of the process into their own hands. This is particularly pleasing for those who are savvy with the mortgage process, such as buy-to-let landlords and those remortgaging.

Buy-to-let: Less activity in the marketplace

The buy-to-let market has been less active over the past 18 months due to the implementation of Government regulation, including changes to Stamp Duty, and the withdrawal of mortgage tax relief for landlords. This slowdown in the market will continue in 2019. It is expected that 360,000 fewer buy-to-let mortgages will be handed out by 2023, according to a report by Shawbrook Bank and the Centre for Economics and Business Research. We are likely to see amateur landlords with one of two properties sell up, which benefits first time buyers looking to purchase these types of homes. However, all is not lost.

The changes are likely to have a positive impact on the quality of the landlords operating in the marketplace, with more rogue landlords leaving.  With a better quality of landlord, there will be a better quality of private rented stock, and that could help to underpin rents and yields in some regions.

First-time buyers: On the up

First-time buyers have been reaping the benefits of landlord restrictions, as the number of new homeowners has steadily risen in 2018. The Help to Buy Scheme has been instrumental in getting first-time buyers in the marketplace, with 81% of first-time buyers getting on the property market by using the scheme (136,657 purchases). With house prices falling in London and the South East and the Help to Buy scheme extended, there is more hope for first-time buyers who have a deposit together and are looking to buy their first home.

Michelle Niziol is a former mortgage broker. She began investing her own property portfolio, using her experience to found IMS Property Group, in 2008. The firm assists with sales, lettings, mortgage advice, and property development. In 2018, she expanded her business into Michelle Niziol Bespoke Property Solutions, where she provides bespoke investment solutions for clients.