It’s now nearly three months from the shock result of UK to leave the EU. We’ve been told that “Brexit means Brexit”, but for the time being, nobody seems to know exactly what will happen next – politically or economically.
In terms of property, such uncertainty breeds uncertainty – and borrowing has dropped considerably. According to data from the Council of Mortgage Lenders, total borrowing by house owners was £10.6 billion in July 2016 – down 13% compared to the previous month and a 12%.drop compared to the previous year. At 58,100, the total number of loans taken out by homeowners was also down 14% month on month and 13% year on year. First-time buying also took a hit – down 19% month on month and 6% lower than June 2015.
So should we be worried about a slowdown? A drop in borrowing can suggest a cooling off in the market, but there may be factors other than the referendum result at play here.
Paul Smee, director general of the Council of Mortgage Lenders, said: “It is hard to determine whether these figures reflect a first uncertain reaction to the referendum vote, or are a sign of a market which was already cooling. It will be quite some time before a full assessment can be made. We do believe that the Buy-to-let lending market is still readjusting after the large level of activity before the changes to stamp duty on second properties in April.”
It’s important we look at the context. If we go back to the data for June 2016 from the Council of Mortgage Lenders, we see some striking rises: a 29% month-on-month increase in borrowing by homeowners (12% year on year) and a 28% month-on-month increase in borrowing by first-time buyers (25% year on year). This flurry of activity in June puts the drops in July in a slightly different light, as such peaks in growth were unlikely to be sustained.
It’s also interesting to note that some sectors of the borrowing market are definitely on the up. Remortgage activity reached £6 billion in June 2016, 7% higher than the previous month and a 20% year-on-year increase. Following the base rate cut in August to 0.25%, it seems home owners wanting to unlock some of the value of their property are taking advantage of ultra-low rates.
So I don’t think it’s time to talk about the property market getting the Brexit blues just yet. But a little forward-planning can go a long way. If you have an idea of how you’d like your finances or property portfolio to look in five years’ time, we’d love to talk about how we could help you make it happen.