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Industry speculates on Brexit impact

As Teresa May headed for Brussels for crucial Brexit negotiations, mortgage industry experts were confident a deal could be done – but probably not today.

While the Prime Minister thrashed out the details of a Brexit deal with European leaders, a panel discussion at the Mortgage Strategy Leaders Forum examined how Brexit would affect the mortgage market.

Chairing the panel, Association of Mortgage Intermediaries chief executive Robert Sinclair (pictured) asked delegates how they felt about the Prime Minister’s chances of securing a deal. None of the room raised their hands in answer to “relaxed” with a handful “ambivalent” and the majority “concerned”.

Investec Private Bank business development manager Peter Izard said one of the big issues will be the Irish border and customs checks. “Negotiations will be difficult for May, versus 27 other countries. It will be the 11th hour of the 11th day before a deal will be done but I think a compromise could be reached in time,” he said.

Intermediary Mortgage Lenders Association executive director Kate Davies said May was in an impossible situation and was “damned if she did, damned if she didn’t on key details” while Barclays head of intermediaries Craig Calder said a “no deal” was in no one’s interests.

Sinclair asked the panel what they thought the outlook was for the Bank of England base rate. Calder thought the next increase would be next year. He pointed out that swap rates “were still quite volatile and could be up or down 5, 6 or 7 basis points in a day”.

Izard predicted the next rate rise would be a 0.25 per cent rise in February 2019. He pointed out the fundamentals of the UK economy were good – unemployment is at an all-time low and wage growth growing – and this would put pressure on the monetary policy committee to raise rates. He said: “If we raise the base rate and Brexit goes pear-shaped it gives the banks some manoeuvrability to reduce rates again. The market feels there will be a deal and the ramifications of a no deal would be massive.”

As well as having an effect on interest rates, the panel agreed that Brexit would have an impact on the new build market and the number of homes being built.

“A lot of bricklayers are Eastern Europeans and have gone home after Brexit,” said Izard, “I call it the ‘bricklayers index’ – bricklayers’ daily rate has doubled as homebuilders struggle to find workers.”

Another possible consequence of Brexit is whether compliance with EU mortgages regulations has all been in vain. But Davies pointed out that a lot of the EU regulations started with the mortgage code. “The EU mortgage code was a watered-down version of the CML code. I can’t see the regulator waning to unpick the rules. The Mortgage Credit Directive was only a small slice on top of MCOB,” she said.

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