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20 Jan 2019

Should you buy a house before Brexit?

We explain the options available to first-time buyers and home movers

With the UK set to exit the European Union in less than three months, homebuyers across the country are asking one big question: should I wait to see what happens or take the plunge now?

Whether you're a first-time buyer looking to get on the ladder, or a home mover waiting to exchange contracts, it's perfectly reasonable to be suffering from a case of Brexit jitters.

But the truth is that nobody definitively knows what will happen to the economy or indeed the property market over the next few months.

Here, we take a look at the options available to homebuyers as the clock ticks down to 29 March.

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Buying before Brexit: the big questions

Are house prices going to crash?

Talk of a property market meltdown makes for good newspaper headlines, but in truth there's no indication a crash is on its way. In fact, house prices are still rising, just more slowly than they once were.

Indeed, data from the ONS House Price Index released earlier this week showed prices increased by 2.8% year-on-year in November.

But what will happen later in 2019? Rics (the Royal Institution of Chartered Surveyors) predicts that house prices will hold steady this year, although it says London and the South East may see a small drop. Other property experts predict moderate increases or no change.

So while the property market seems to have reached the end of the blockbuster growth seen in many areas over the last decade, it's highly unlikely that prices will crash in 2019.

Are people still buying and selling houses?

While activity in the market has slowed, there's evidence that deals are still going through.

HMRC transaction data from November (December's figures will be released next week) shows that 100,930 properties were sold during the month, compared with 101,410 a year earlier.That's a fall of less than half a per cent, suggesting the market is hardly grinding to a halt.

It's impossible to say what might happen over the next few months, although it is feasible that a 'no deal' Brexit or extension of Article 50 could result in transactions slowing further, as buyers and sellers opt to stay put.

Ultimately, though, a significant slowdown seems unlikely.

Is it a buyer's market?

Property markets are hyper-local, so while national data is useful as a snapshot, you shouldfocus your research on the area you're looking to buy a home.

While a slower market could theoretically allow buyers to negotiate a better deal, fewer listings can mean greater competition for the highest quality and most sought-after homes. And with competition comes higher prices.

As ever, do your research and don't rush in at the first sign of a bargain - if it seems too good to be true, it probably is.

Buying before Brexit: should I do it?

First-time buyers

  • Are you using a government scheme?The popularity of schemes such as Help to Buy and shared ownershipshows no sign of slowing down, but make sure you educate yourself on issues around affordability and leasehold problems before considering buying a new-build.
  • Do you only have a small deposit?Now is a great time to buy a home with a 5% deposit, with highly attractive mortgage rates at 95% loan-to-value. But if you're able to hang on and save a bigger deposit you could get a much better rate, potentially saving you thousands in the long run.
  • Should I buy?If you've found the right property for the right price (relative to its area) and are thinking of moving for the longer-term (such as five years or more), Brexit shouldn't necessarily put you off.If you're likely to want to move home again in a couple of years, you may prefer to hold off for now and see what happens over the next few months.

Second steppers and home movers

  • Are you getting the right deal?The market is very price sensitive, and in some areas values are still at or near their 'ceiling' levels. This means overpaying could result in you ending up in negative equity if values drop, so more than ever it's important to err on the side of caution and ensure you get the right deal.
  • Is there any reason to not buy the property?Brexit in itself isn't a reason to not buy a property, but there are many other reasons not to. Trust your instinct, your surveyor and your conveyancer.
  • I've already had an offer accepted, should I pull out?Again, the above applies. If you've found the right home for the right price, it makes no sense to put your life on hold to see what happens with Brexit.

Buying before Brexit: mortgage implications

Cheap mortgage rates may tempt you to buy before Brexit, especially if you only have a small deposit.

Despite two increases in the Bank of England base rate, fixed and variable deals remain attractively priced, but for how long? There are signs that the only way is up, with the prospect of further base rate increases and lenders likely to pass any higher charges they face on to borrowers.

If you are thinking of getting a mortgage now, you'll need to make a judgment call between flexibility (such as a two-year fix or discount mortgage) and security (which could be offered by a longer fix for five, seven or ten years).

The right decision will depend on your own circumstances and how long you plan to live in the property. For example, a two-year fix allows you to shop around for a new deal after 18 months, while a five-year fix protects you against rate rises but hits you with early repayment charges if you decide to move.

In many cases, mortgage are now more affordable - but cheap mortgage rates alone aren't a reason to rush out and buy a house.