House-Money2-250x175Prior to the EU Referendum vote, no one knew what effect the outcome could potentially have on house prices. As it was, the vote for Brexit did not trigger the doom and gloom many Remainers predicted it would.

With that said, though, increases in house prices have slowed in recent weeks, although they still remain on an upward trajectory. According to the price index collated by Halifax, the three months up to August saw an increase of 6.9% overall. This is still a healthy increase, but it is less than we saw in the previous three-month period. At that point of the year, the increase was 8.4% – equating to a drop of 1.5% overall from one quarterly period to the next.

What does the immediate future hold in store?

Analysts had previously gauged a growth rate of 7% over this period, so while the actual figure wasn’t far off this, it was slower than was expected. We are almost three months on from the Brexit vote now, so the outcome of that is becoming known.

Will it affect home buyers?

House prices are tied in to a variety of different things. For example, a drop in demand is often matched by a drop in prices as people who do want to sell price their homes at a more appealing level. Prices may also drop on properties that have been on the market for some time.

There are signs that the housing market has slowed down in recent weeks – particularly since the Brexit vote became known. Some people are holding back from moving or buying property, purely because they want to see how things pan out. In this context, a drop in house prices is understandable.

While mortgage rates are very low at the moment, there have also been indications that some mortgages for customers with 5% deposits have been withdrawn from the market. While this hasn’t happened on a large scale, some banks and building societies have withdrawn some of these products.

Why is this? There is some concern that with house prices stalling to some extent, getting a mortgage for the lion’s share of a property price can leave homeowners vulnerable to negative equity. If house prices fall in the early years of the mortgage, there will be little to no equity in the property to provide a cushion against negative equity. Suffice to say, those with bigger mortgages and smaller deposits are more prone to be affected by negative equity than those in different situations.

So it will be interesting to watch the house prices to see whether they bounce back, or whether this slowing of the market will continue for the foreseeable future. Halifax believes the annual rate of growth has dropped to its weakest level for almost three years. Clearly this is more than just a blip. The question is how long this blip will last for, and how much homebuyers with smaller deposits will be affected.

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