Uncertainty created with Brexit could see house prices fall by 5% and decreasing swap rates may produce better mortgage deals.

Homebuyers are pulling out of deals following uncertainty caused by Brexit and consulting group KPMG has forecast a 5% fall in property prices outside London.

The Capital could see prices lower by 10% with a more severe drop for luxury central London property as international investors.

A fall in property prices would be good news for first time buyers requiring a lower deposit or income multiples to buy their home.

Royal Institution of Chartered Surveyors (Rics) has reported a fall in buyer enquiries before the EU Referendum and 35% of their respondents reported central London prices had fallen rather than risen over the past month.

Mortgage rates to fall

The pricing of fixed mortgage rates is based mainly on the ability of banks to access low cost money to lend to first time buyers, home movers, remortgage buyers and buy-to-let landlords.

Banks typically use money from savers or by borrowing from other banks on the money markets by using “swap” rates for a particular time period.

Swap rates rise and fall depending on the expectation of interest rates and inflation and after the Brexit vote the 5 year swap rate reduced from 1.20% to 0.96% a few days later.

The longer swap rates remain low the more likely mortgage rates will also fall although five year and ten year fixed rate mortgages have started to reduce.

For remortgage buyers at the end of your mortgage deal, avoid the lenders expensive variable rate and switch to a preferential rate to reduce your monthly repayment costs.

Nationwide have a ten year fixed rate mortgage at a 2.99% rate, the HSBC have a five year fixed rate at 1.99% and a two year fixed rate mortgage at a 0.99% rate although this would require a 35% deposit.

The equity release mortgage buyer can secure fixed rates typically from 5.8% upwards without any evidence of earnings, important for borrowers with only pension income.

Property sales volumes lower

Richard Donnell, director of research at Hometrack, has said external shock to the housing market can reduce sales volumes by as much as 20%.

The immediate impact is likely to be a fall in housing turnover and a rapid deceleration in house price growth.

Many buyers will delay making decisions to buy with big drop-off in transactions. Last year investment buyers represented one in five purchasers and we are already going to see fewer of them.

People who are buying for discretionary reasons, such as international investors or buy-to-let landlords, may not be in the market for the next three to six months and this could impact the central London property market in particular.

Jan Crosby, head of housing at KPMG, says the number of homes on the market will be low for some time and not recover until next Spring.

We may not see much change this summer due to uncertainty in the property market and the usual p improvement in the autumn may not materialise.

What are your next steps?

Call our LCM mortgage brokers for advice if you are a first time buyer, want to remortgage your existing home for the best mortgage deal, moving home or are a buy-to-let investor.

For equity release buyers our London City Mortgage advisers can recommend lifetime mortgages allowing you to receive cash from your property for home improvements, holidays or even give to a family member.

Learn more by using the property value tracker chart, mortgage cost calculator and equity release calculator. Start with a free mortgage quote or call us and we can take your details.

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