What could ‘No-Deal’ mean for Your Remortgaging LTV & Options?

Britain’s new Prime Minister Boris Johnson has said he wants Brexit to take place on 31 October. That’s whether a deal has been agreed with the EU or not. You may wonder in how far or if your remortgaging LTV (Loan-To-Value) will be affected if ‘No-deal’ is the outcome? What might this mean for your finances if you’re a homeowner? And what are the repercussions if you’re considering remortgaging – now or soon?

The fact is that no one knows. As Martin Lewis of moneysavingexpert.com says, the only certainty is uncertainty.

“The only thing that is certain for the economy at the moment is the uncertainty. That isn’t a trite phrase. It means when you’re making any decisions, you have to factor in the chance of substantive change,” he says.

The Brexit outcome will undoubtedly affect interest rates, foreign exchange rates and the strength of the UK’s economic growth. This will have an implication for job security, house prices, mortgage and savings rates and more. But right now, no one knows which way they will go.

What Brexit Scenarios should You Bear in Mind – Will my Remortgaging LTV be affected?

If you’re thinking of remortgaging, then the current value of your home is important.

House sales and house prices have undoubtedly been affected by the Brexit uncertainty over the last three years. The effect is continuing now, with the housing market sluggish at best.

New data from HMRC shows that the number of property sales has fallen by 16.5% year on year, with the lowest number in June 2019.

This represents the lowest number of property sales since April 2016, when the 3% buy-to-let stamp duty surcharge was introduced.

Clearly, there’s a lot of nervousness right now from homebuyers. In January, the average time for a property to go under offer shot up to 77 days, the highest on record. It has since dropped to 62 days in June. But this is slower than in previous years.

Many property experts say this is down to uncertainty around buying a home in the run-up to Brexit.

In July, the Office for Budget Responsibility predicted that a no-deal Brexit would lead to house prices falling by almost 10% by mid-2021.

So if you’re thinking of remortgaging, this is relevant. The further house prices fall, the more your remortgaging LTV (Loan-To-Value) and your borrowing potential may be impacted. This means it may be harder for you to remortgage in future.

What might a ‘No-Deal’ mean for Interest Rates?

Good question. If the economy bottoms because of Brexit then interest rates may fall. (That said, at 0.75% today, they are already incredibly low). The Bank of England may cut rates further, however, to reduce the cost of borrowing and stimulate the economy.

But the opposite is also possible. If the pound drops due to Brexit, exports will cost more to buy, which will push up inflation. This may mean rate rises.

Alternatively, if Brexit boosts the economy, then the reverse can happen.

Does a ‘No-Deal’ Prospect mean putting Remortgaging Plans on Hold?

You should make your decision based on your personal circumstances right now.

Factor in where in the life cycle of your current deal you are. Are you nearing the end of your fixed term or discount rate, for example?

Are your personal circumstances likely to change in the near future with your employment or your need to move to another property?

If you think that remortgaging now is right for you however, then don’t be deterred by the current uncertainty.

Remortgaging rates are close to historic lows right now. So if you want certainty and are eligible for a cheap fix, then don’t hesitate.

Clearly, this is the thinking of thousands of homebuyers right now. Remortgaging has now hit a 10-year high.

What’s more, most of these re-mortgagors obviously have their eye on the uncertain future ahead. It’s why they’re thinking long-term. Nearly half of borrowers remortgaged in April with a five-year fix.

Are you interested in learning more about remortgaging? To have an informal talk about your options, we’ll give you personalised, impartial advice on your remortgage if you would like to contact us here.

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