What does Brexit mean for your finances and property debt? The financial future of the UK, following the vote to leave the European Union is highly uncertain. What will it mean for home owners? What will happen to our property debt and mortgage payments? What happens to our housing market?
There is no experience upon which to draw because there are no examples of how others have fared after leaving the EU. There are no charts, no maps, and no paths to follow.
On Friday morning, UKIPS Nigel Farage was hailing June 23 as Independence Day. In view of the problems which lie ahead, however, others who felt he had been overly optimistic in his thinking suggested Independence Decade might be a more accurate and honest assessment of what will be required. The other 27 EU member nations wanted, and expected, the UK to stay, for which reason they were stunned by the outcome.
As a result of Brexit, there is massive social and financial uncertainty. There is uncertainty for those of us harnessed by property debt. And concern about how this is all going to translate in the lives of ordinary people. Those in business take their decisions and make their deals based on stability and probability in so far as that can be predicted. If they dont see good reason to do deals and invest money, Northern Ireland jobs will be at risk. And if that happens, obviously our spending power is going to be reduced. Knock-on effects for home owners? A possible increase in property debt and an increase in negative equity.
As for property prices, Hometrack director Richard Donnell warned: The immediate impact is likely to be a fall in housing turn-over and a rapid deceleration in house price growth as buyers adopt a wait and see attitude for the short-term impact on financial markets and the economy at large.
The Treasury has predicted that house prices could drop by up to 18% over the next two years with the post-Brexit hit on the economy also leading to more expensive mortgages. That could lead to a significant increase in both negative equity and property debt if interest rates rise, as expected. Can we cope with higher mortgage payments? Can we cope with more debt?
The International Monetary Fund (IMF) predicted a sharp drop in house prices, though if that were to happen it would of course be welcomed by first-time buyers, if not those trying to sell before moving up the ladder. That said, first-time buyers were already quite active on the UK's property scene prior to June 23.
Meanwhile the plummet in the share prices of the UKs biggest house-builders within hours of the result of the vote being known put paid to the likelihood of further building projects at this point.
Worst case scenario? House prices begin to fall and interest rates start to rise. If that were to happen, we really would be looking at carnage in the property market, with even greater numbers being dragged into the negative equity quagmire and increased property debt.
If you are struggling to make monthly mortgage repayments at a period when interest rates are at an all-time low, how much more difficult might that become if they rise? House prices are dependent on the supply-demand equation, the availability of loans and the state of play in terms of would-be borrowers employment and wage prospects. How secure is the mortgage applicants job? What is the probability of him or her being able to make monthly repayments for the next X years?
In view of what has happened, you may want help in trying to make good decisions regarding buying, selling or sticking with property, particularly if negative equity already is an issue. And with inflation now certain to rise, big property debt problems could be just around the corner.
Are you worried about what might happen to your existing property?
There are other options to negative equity and property debt, rather than handing back the keys.