House prices: Why first-time buyers are the big Brexit losers
09-18-2016
Valuations are still rising and high-deposit mortgages are in net decline
House prices: Why first-time buyers are the big Brexit losers
Forecasts for how the housing market would respond to the shock of the Brexit vote have so far been wide of the mark – with house sales showing surprising resilience.
But for first-time buyers things are not quite so rosy.
Before the referendum, experts predicted that economic uncertainty in the event of a Leave victory would cause house prices to fall, with any downward pressure on prices exacerbated by an exodus of overseas buyers.
The Treasury estimated that in the event of a defeat for Remain, house prices would be between 10 and 18 per cent lower over the next two years. This would lead to valuations sliding by up to four per cent a year.
Ratings agencies like Moody's said prices could eventually "correct" by as much as 25 per cent.
But since the Brexit vote, house prices have not followed the predicted script. Indices from Halifax and the Office for National Statistics have reported that prices are still advancing rapidly, with a summer lull accounting for only the most modest cool-down.
Insurer AmTrust says its own calculations put the average cost of a first-time buyer property at £161,921 in June, which Moneyfacts notes is already the highest level seen this year.
At the same time, while high loan-to-value ratios for low-deposit buyers have held up better than expected, there has been a small net decline in the number of 95 per cent mortgages on offer since the referendum.
This means that despite mortgage rates being at record lows and monthly affordability therefore at an unprecedented high, aspiring home owners are likely to struggle more than ever to get on the housing ladder.
This week's figures from the Council of Mortgage Lenders show that the largest portion of mortgage borrowing last month was by those refinancing their existing home at a lower rate. Loans for first-time buyers fell fastest and were down by a fifth compared to July.
There are knock-on effects for those renting. The Daily Mail says the average monthly rent has now "tipped £1,000" while the paper adds in a separate report that London is now rated as the most expensive rental market in the world.
Obviously it's still early days and an actual Brexit is likely to be several years away, but for now, young wannabe homeowners won't be cheering the referendum result.