How will the EU vote affect house prices, mortgages and holidays for families in Suffolk? Read our Q&A to find out
PUBLISHED: 14:44 24 June 2016 | UPDATED: 16:10 24 June 2016
Prime Minister David Cameron announced his resignation this morning after a surprise victory for the Leave campaign which could significantly change the country’s political landscape. But how will Brexit affect you? Read on to find out.
Are house prices set to fall?
The housing market is set for a rapid cool down in price growth and fewer sales as buyers adopt a “wait and see” stance towards the economy following the vote to leave the EU, according to experts.
There have already been signs of house prices cooling as the market held its breath for the outcome of the referendum. A stamp duty hike for buy-to-let investors, which came into force on April 1, has also disrupted the market, as property sales which might otherwise have taken place later this year were bunched up ahead of the deadline for the tax hike.
Richard Donnell, insight director at property analysts Hometrack, said the immediate impact of the vote “is likely to be a fall in housing turnover and a rapid deceleration in house price growth as buyers adopt a wait and see approach to the short term impact on financial markets and the economy at large”.
He added: “History shows that external shocks can reduce sales volumes by as much as 20% with sales volumes already down over the last year.
“House price growth is already weak and running in low single digits in central London areas and modest price falls now appear likely in higher value markets as prices adjust in the face of lower sales activity.”
A report from property agent Knight Frank said that as well as buyers being affected, the uncertainty could also make sellers more reluctant to put their property on the market, “and this lack of supply will provide a floor under prices”.
Sarah Beeny, owner of estate agent, Tepilo, said people will still need somewhere to live, “so the demand for housing will still be there, therefore, I think the property market will be unlikely to be affected in most areas of the country in the medium to long term”.
Will it become more difficult to get a mortgage?
Mortgages could become harder to come by and less affordable if lenders decide to put tighter controls on their lending levels amid the uncertainty, it has been claimed.
Mark Harris, chief executive of mortgage broker SPF Private Clients, described current mortgage availability as “good”.
But he added: “However, when there is uncertainty it affects confidence and people put off making decisions. Those who were thinking about buying property may now decide to leave that decision to say next year, in the hope that property prices will fall in the meantime.
“The luxury end of the housing market is likely to be impacted. Some buyers may try to renegotiate deals that have already been done.”
Property agent Knight Frank said there is a chance that mortgage rates may become “detached” from the Bank of England base rate, which is currently sitting at 0.5%.
But it suggested that while the base rate could be cut further, lenders may actually start raising their mortgage rates as a technique to control their lending levels.
“The reduced availability and increased cost of credit could put additional pressure on transactions as well as affordability,” its report said.
“However, it is worth noting that much mortgage activity recently has been in fixed-term fixed-rate deals, ranging from two to 10 years. Borrowers on such deals will not be affected by rising mortgage rates over these time frames.”
Knight Frank said that a further weakening of the pound may attract more overseas investors to the top end of the housing market as property will look relatively cheap.
Should I be concerned about my pension fund?
Savers have been urged not to make hasty financial decisions they may later regret after the vote to leave the EU.
Pension experts said the message should be “don’t panic” amid the uncertain economy, and savers should consider taking advice if they are planning to take money out in the near future.
Tom McPhail, head of retirement policy at Hargreaves Lansdown, said: “For long-term pension investors who may be seeing the value of their retirement savings falling today, the key message is to do nothing unless you have to.
“We are likely to experience a period of volatility in the markets and uncertainty in the wider economy. In these conditions, acting in haste is unlikely to serve well. If you are years from retirement and making regular savings, then just keep going; falls in the market mean buying investments at a lower price.
“If you are close to retirement, then try to avoid selling funds and shares right now. Annuity rates may move in response to changing interest rates, however this is not certain.”
Mr McPhail warned there could be changes to the state pension as the Government looks to make savings.
He said the “triple lock” on state pensions, which guarantees they are uprated by a certain level, could be an “early casualty” of a Brexit.
Mr McPhail continued: “We could also see a more rapid increase in state pension ages.”
There could also be further curbs to pension tax relief, Mr McPhail said, “so investors would be well-advised to make the most of the available tax relief while they still can”.
Steven Cameron, pensions director at Aegon UK, said: “Our key message to pension savers is ‘don’t panic’.
“If you have a defined contribution or personal pension, its value will be affected by stock market movements and if you are thinking of taking money out in the immediate future, we recommend you first seek advice.”
He continued: “The UK Government might consider other changes to pensions in response to wider economic conditions and we will be monitoring closely any possible impact on our customers.”
Huw Evans, director of the Association of British Insurers (ABI), said: “The UK insurance and long-term savings industry is strong and built to protect customers from market uncertainty and shocks.
“Customers should remember we remain part of the EU until the process of leaving is complete and they should therefore avoid hasty decisions about their financial matters.”
What about my summer holiday?
Many UK holidaymakers travelling abroad will pay more for foreign currency after the pound plunged – but Prime Minister David Cameron said there would be “no initial change in the way our people can travel”.
Ian Strafford-Taylor, chief executive of currency provider FairFX, said the reaction of the pound to Brexit could signal “longer term volatility”, with holidaymakers “directly impacted”.
He went on: “Those consumers who did not stock up on their holiday money may find their holiday now becomes more expensive this year, if weak pound-euro rates continue into the summer.
“For example, yesterday consumers exchanging £1,000 would have received 1,306 euro but today they would only receive 1,231 euro – a difference of 74.60 euro (£60.61).”
Andrew Brown of Post Office Travel Money, which accounts for around a quarter of all UK foreign exchange transactions, urged holidaymakers to “watch currency movements very carefully”.
He said: “For those who have not yet booked their holiday but are planning to travel abroad during the summer or later in the year, it will be well worth doing some homework before making a decision.
“Choosing a destination where sterling is strong and also where the local cost of living is low could make a significant difference to how far the holiday budget will stretch.”
Travel organisation Abta said travellers due to go abroad this summer will see “little changes to their holiday”.
It said: “Once the UK formally notifies the EU of its intention to leave, the remaining member states will have up to two years to offer the UK a deal for a future trading relationship and during this period holidaymakers will not see any immediate changes.
“However, the fall in value of the pound will have an immediate impact on holidaymakers and their spending power overseas.”
Joel Brandon-Bravo, UK managing director of travel deals company Travelzoo, warned the referendum result would have an impact on the tourism industry in several ways.
He said: “The next 24 months of negotiations will be crucial for British travel - particularly if the UK Government wants to maintain inbound tourism from the EU, and avoid a price hike for Britons wanting to travel abroad for holidays.
“Obviously top priority is dealing with the impact the referendum result will have on the value of the pound, but there are other factors that could make the result a big blow for the travel industry.”
Mr Brandon-Bravo urged the Government to quickly negotiate how an independent UK will operate in the European Common Aviation Area.
The cost of filling your car
The AA has predicted that fuel prices at the pumps are likely to creep up following falls to the value of the pound.
I’m going abroad this weekend - will my travel insurance still be valid?
Travel insurance products will continue to offer all of the cover that they do at the moment - there will be no immediate change to any existing policies you currently have. The European Health Insurance Card (EHIC) will continue to apply.
I am planning to drive in Europe next month - will there be an impact on my motor insurance?
UK policies will continue to automatically cover you for the minimum legal requirement in EU countries. You should check your policy or talk to your insurer about more comprehensive cover if you want it, as has always been the case.
I buy my home or car insurance from a company which is not British. Will it still be valid?
Existing contracts with insurance companies and pension providers will be unchanged, wherever the company is based.
On Monday, Suffolk accountant Keith Senior, of Jacobs Allen, will be answering your questions on the economy, your personal finances and how the result could affect them. You can submit your questions here
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