Most people are now aware that everyone of voting age in Britain will shortly get to vote on whether the country should leave the European Union. The referendum is due to take place on 23rd June, and needless to say, both the Leave and Remain camps are ramping up support for their arguments.
The most recent forecast delivered by the Treasury claims that house prices in Britain could fall by 10% or more if Britain does vote for Brexit. Chancellor George Osborne has also warned that mortgages could be more expensive in the event that Britain votes to leave the EU.
Could mortgages also rise?
There is a chance mortgages might also rise given the reality of a British exit from the European Union. However, with that said, no one really knows what might happen in the event we did leave the EU. One person has pointed out to the Chancellor that a drop in house prices could actually make it much easier for first-time buyers to get on the housing ladder for the first time. In reality, any potential statistic like the one relating to a possible drop in house prices could be seen as a positive as well as a negative.
Are these forecasts wrong?
It is also worth bearing in mind the comment made by Iain Duncan Smith, who is supporting the Vote Leave campaign. He dismissed the claims of such a significant drop in house prices. They are based on forecasts and he said “most forecasts are wrong”. He claimed that George Osborne had previously said Treasury reports couldn’t be trusted, which is why the Office of Budget Responsibility (OBR) independently produces reports and analysis in this area.
The question of more expensive mortgages
A lot depends on whether we experience inflation as a result of Brexit becoming a reality. One survey conducted by Reuters recently found 17 out of 26 economists predicted we were more likely to see an interest rate cut by the Bank of England, and not a rise. One economist said the only likely scenario in which rates would rise (thereby affecting mortgage payments) would be if the pound fell in value. This may happen, but the odds of it falling to crisis levels are thought to be small.
In the end, we cannot know how Brexit would affect mortgage payments or house prices unless and until it happens. However, there is always a chance mortgage rates could go up at any time, with or without the European Union playing a part. There are all kinds of factors that can affect mortgage rates, and there is no clear evidence that shows this would be a likely outcome if we did leave.
With just a little over four weeks left until Brits go to the polls to vote in the referendum, we shall have to wait and see what happens – and how it may affect the mortgages we have and the value of the houses we live in.