What Does Mid-Year 2017 Hold For Your Finances After Brexit?

Following the announcement of Brexit, the pound saw a significant drop but since then the British currency has somewhat recovered.  While many factors do remain uncertain, we can predict what will happen with our finances in the coming months based on emerging patterns.

Interest rates

A drop in the pound would normally make the UK base rates go up, making people want to use foreign currencies to buy pounds in order to get better returns, consequently making the rate stronger.  This is crucial because if the pound is weak, imports will become more expensive, which in turn will increase in inflation. Amidst fears of an economic downturn, the right step to take was to create economic stimulus by cutting interest rates, making people want to spend more.The UK base rates were cut to 0.25% and while the Bank of England proposed that there could be further cuts, the economy has been resilient so far so we don’t expect anymore rate cuts and if anything, they might go up.

Mortgage rates

With the Trump victory, it is believed that the U.S. economy will receive an enormous boost and if that happens, the UK is sure to follow.  Post-Brexit, we saw a bit of a drop in mortgage rates, especially with the longer fixed deals. While mortgage rates are relatively cheap right now, very soon we might start seeing less of these cheap deals, especially for 5 and 10 year fixes.  It is possible we stop seeing exceedingly cheap deals beyond 2017. Meanwhile, due to the uncertainty of these times, UK Banks prefer to keep strong capital reserves, meaning there is no better time for you to learn to manage your credit scores.

House prices

Following Brexit, many were hopeful that house prices will rise and it’s easy to see why. With higher prices, you could lower your loan to value, meaning you may get a less expensive mortgage. Also, selling your house at a higher price means you can move to a bigger place. The issue here is house prices remain unpredictable.

Immediately after Brexit, some people dropped deals and demand was expected to drop while prices were expected to be impacted. While this was part of the initial shock, there is still a limited supply in the country which has contributed to the high prices. It is better not to wait for prices to go up since the market is uncertain and no one is sure what will happen to house prices within the next few months. If you want to sell your house now you should do so and base your decision on factors which you know.

We will need to wait until after the general election to have a clear picture on how Brexit negotiations are going to progress, and what kind of relationship Britain is going to have with the EU moving forward. If the public votes as the polls suggest, for Theresa May’s Conservative Party, we may see a ‘Hard Brexit’, which will have big implications for the UK moving forward.

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