Image
Homeowners could be at significant risk of crashing house prices in the event of no deal being struck between Britain and the EU, the governor of the Bank of England has reportedly told the cabinet.
Reports from several national news outlets suggest that during a meeting with the cabinet on Thursday afternoon, Mark Carney the governor of the Bank of England cautioned that a 'worst-case scenario Brexit' would lead to a housing market price crash of up to 35%.
According to the BBC the Bank of England carried out “stress tests” in November last year that found a 33% fall in house prices would occur in a worst-case scenario – where Britain left the EU with no deal, no transition and no government preparation.
The government released a series of Brexit no deal assessments on Thursday to give more clarity to the public and businesses of its preparedness in the event no deal is struck with the European Union.
A Downing Street spokesperson told the BBC that government ministers were confident of a Brexit deal but had increased their no-deal planning.
The spokesperson said to the BBC: “As a responsible government, we need to plan for every eventuality. The cabinet agreed that no deal remains an unlikely but possible scenario in six months' time."
Moneywise approached the Bank of England for comment but none was forthcoming.
What a no-deal Brexit could mean for homeowners
The Bank of England’s worst-case scenario says that house prices could fall by up to 33% over three years in the event of a messy divorce from the EU.
This could lead to homeowners becoming trapped in negative equity if their mortgage debt is higher than the value of their property.
Retirees reliant on the value of their property to help fund their retirement could also be negatively affected as the wealth stored in their homes reduces.
Will Hale, chief executive of equity release adviser firm Key, says: “When we think about house prices, we need to bear in mind many different influencing factors. As a country, we are not building enough homes to meet our current needs so demand is likely to remain high and while we have seen house price fall in the past, over time, we have seen these offset by sustained periods of increases.
"Until a person chooses to sell their property or refinance, any increases or falls are not actually realised."
Lower house prices could, however, prove a boon for first-time buyers hungry to snatch up cheaper property. This could also be the case for buy-to-let investors looking to expand their portfolios.
But the warning from the governor have been met with a dose of scepticism from some commentators.
Mr Hale adds: “The simple fact is that we do not actually know what is going to happen post Brexit as no one has a crystal ball. The Bank of England is responsible for delivering monetary and financial stability so it is their responsibility to look at the implications for all extreme scenarios – both good and bad – but is seems that only the negative assumptions have been picked up in the headlines."
Henry Pryor, an independent property expert, agrees: "Don’t panic, this is highly unlikely to have been what the Governor told the cabinet, less than a year ago he explained in detail that the Bank of England had modelled the worst-case scenario of house prices falling by a third but that this is not what the Bank expects.
"Prices may well slip in the first quarter next year regardless of a hard or soft Brexit - uncertainty just as we had over the Millennium Bug in 1999 will mean many buyers will postpone their purchase until next summer. Unless they are given a discount to reflect the perceived risk they are taking most buyers will just wait and see.
"The main house price indices will therefore reflect these discounted prices but they will not be of the magnitude that has been reported. The Bank has planned for the worst but is not predicting that this is what will happen."
The stress tests conducted by the Bank of England also reflected a scenario where interest rates rose to 4% and unemployment jumped to 9%. However, these tests are designed to be a worst-of-the-worst type scenarios.
Section
Home & mortgage SellingFree Tag
Brexit house prices propertyRelated stories
Source Moneywise https://ift.tt/2CXyikm
ليست هناك تعليقات:
إرسال تعليق