A result either way could be a boon for the market but to suggest a Brexit may ‘cure’ the housing crisis is too simplistic
We are now at the peak of the EU referendum frenzy. Most minds are made up and nervous politicians and business leaders are pacing up and down, waiting to see what is going to happen.
The biggest issue with the Brexit debate has been the fact that both sides have run a pretty poor campaign, preferring to concentrate on fear and speculation than to try to address the real concerns of the general public. It is a shame that the most important vote in a generation has been conducted through playground politics.
I make no secret of the fact I am in the ‘Remain’ camp but George Osborne’s latest move to threaten a harsh emergency Budget in the event of a Brexit seems nothing short of bribery and desperation, which leaves a funny taste in the mouth.
The reality is we are in uncharted waters and no one knows what will happen either way. All we do know is that markets dislike uncertainty. While in the long term we may be in a better place either way, the short-term uncertainty after an exit would likely have a marked effect on interest rates, the housing market and the economy in general.
The view that a Brexit may ‘cure’ the housing crisis is far too simplistic. Although a ‘Remain’ vote could lead to a housing bounce, there is also an argument that the fall in the value of the pound following a ‘Leave’ victory would encourage foreign buyers to invest in London property once more, and a potential immediate cut in interest rates would assist others. In other words, a result either way could be a boon for the market.
The real issue in our market with a ‘Leave’ vote is how much it would affect lenders’ lines of credit. Some predict the availability and cost of funds would increase, making mortgage finance more expensive. We have seen the effect of these types of issue before and I have no wish to see it again.
There is also the question of whether having to rely on more expensive British labour would increase the cost of basic goods and services, which could mean interest rates having to increase faster and further to keep inflation in check and protect the pound.
Despite what the polls say, my gut feeling is that the silent majority would rather not go through another two years or so of uncertainty and will vote ‘Remain’. But it will be close.
For me, this is a head-versus-heart decision. I am fiercely patriotic and was cynical on Europe from the start but we are deeply engrained and to extricate ourselves in an already uncertain world would cause too many issues.
Those fighting the Brexit corner do not inspire confidence. They preach only fear and division, which are the last things the world needs more of right now. Either way, this industry will survive and make the best of whatever the future holds.
In the markets, three-month Libor is still at 0.58 per cent while swap rates have trickled down like the sweat on David Cameron’s brow.
2-year money is down 0.04% at 0.70%
3-year money is down 0.05% at 0.74%
5-year money is down 0.09% at 0.84 %
10-year money is down 0.09% at 1.21%
Meanwhile, well done to Virgin Money for its advertising campaign to promote the benefits of using an intermediary. This shows how far lenders have come in recognising that working in partnership gives better results for both of us, as well as consumers.
Elsewhere, Halifax has reduced 90 per cent LTV first-time buyer rates on two- and five-year fixed products by 0.3 per cent, while Nationwide has reduced selected fixed and tracker rates. Tesco Bank has cut five-year fixes at 85 per cent and 90 per cent LTV a touch.
Coventry has lowered rates on its excellent buy-to-let Flexx products, with its variable-term rate at 2.79 per cent with no penalties to 75 per cent LTV. Its standard five-year fix is 3.29 per cent and both have a £1,999 fee.
Aldermore has released a buy-to-let Summer Special, sizzling in at 3.25 per cent fixed for five years to 80 per cent LTV with a 1.5 per cent fee. Meanwhile, Precise has a lifetime tracker to 70 per cent LTV at 3.99 per cent for loans above £400,000 with a flat fee of £3,995.
Finally, National Counties is the latest lender to make its buy-to-let products available to limited companies.
Andrew Montlake is director at Coreco