Mark Carney Brexit house price warning

[BlueKittens]

Is now a really bad time to sell/buy a house?

We’ve recently put our house on the market to move to a larger house in the same area. Basically because I’m unexpectedly pregnant with our second child. We could hang on in our current home but we’d be a bit squashed because DH works from home. We have seen a great property nearby which we’d need to take out a slightly bigger mortgage to buy (but we have good LTV). We live in one of the fastest moving housing markets in the country (comparatively- it feels quite slow recently!). House prices are high. House has been on over a week and have had 9 viewings. No offers yet but have second viewings booked in.

Thoughts please! I don’t mind if the comments are directly related to our situation or just general chit chat around Brexit and house prices.

People need to stop panicking... get on the ladder now, if for no other reason that we are now living through one of the lowest interest rate periods since records started.

Its all very well to crow about potentially lower house prices, but the reality is that a general devaluation of that extent would probably see a seismic shift in interest rates (upwards) and mortgage lenders becoming very very cautious - after all, who would want to lend money against a house value that might fall even further.

House prices, even if they fall, will probably have little effect on first time buyer access. Lenders will want bigger deposits for a start to shield themselves against further price fall risk. Your house may cost less, but ti would cost more every month (interest rate) and you will need to save a higher proportion as deposit at the front end.

Plus, with a fall of 35% who will be wanting to sell? People like me will stay put in the hope of riding a blip in the market out and house developers would do likewise with an eye on profits. The market would stagnate for years.

ToBeClear, what about those without mortgages or those renting? High house prices only benefit a few and its an economic curse that this country needs to get rid of.

@MouseMartin I couldn't agree more. High house prices are a curse on the economy, and only benefit downsizers, who are a very small minority.

Let me guess though - mousemartin and analyticalchick are not yet homeowners?

@cloudtree True, but even if I owned, I would not want house price inflation, since it makes it much harder to move up the housing ladder.

I dont think you will see general house price falls resulting in similar rent falls...

If I were a landlord (Im not but have been in the past when we went overseas for a while) I would feel under pressure to maintain existing rents (or maybe a modest drop) because I would want to limit my losses.

Its a bit like how we have a lowest interest rate environment but things like credit cards are still expensive...

I wish schools taught basic economics for everyone. I think people have forgotten the impact of the crash 10 years ago. All property is an investment whether you are mortgage free or not. When asset values decrease it is NEVER a good thing. If things are cheaper in general people forget that this will impact wages. If you like it when things are cheap - businesses also like it when their resources, such as employees, are cheap too. A crash is NEVER a good thing whether you own a house or not. Lower house prices mean people will have negative equity and will be walking away leaving the keys in the door just as they did 10 years ago. Then the bank is left with the debt which impacts the end consumer again. We're in such a mess because people think only about how it impacts them. Yes I might lose 100k but what's the alternative - ride it out renting for the next five years when my husband will only be 10 years from retirement? We'll no doubt continue with the purchase but this is not scaremongering. Our politicians need to get a grip and a deal.

I agree it’s not a good news story at all. In this scenario the impact on the economy would be widespread and the benefits for FTBs will be more than cancelled out by the economic costs and years of stagnation. Be careful what you wish for. A slower fall (rather than shift) would be much better for all.

Mark Carney knows what he’s talking about and this is a possibility. Brexiters have to accept responsibility for the damage they could be wreaking on the economy. 48% of voters do not want Brexit so there could be a lot of animosity if the costs are very high... for what are currently intangible, unknown benefit.

Brexit is such a catastrophic error as it risks both peace and prosperity. And for what gain?!

10degrees interest rates won't necessarily increase - if consumer confidence is low as a result of Brexit then they'll have to keep money moving by keeping interest rates low.

I don't agree @Bluekittens. For many people in this crazily overpriced market it is a good news story. It all depends on your outlook.

bluekittens why do you think the market is overpriced? Prices respond to supply and demand!? Are you talking about London or the whole of the UK? If all houses were overpriced banks wouldn't be taking on the risk!? That's why they do valuations...

sorry bluekittens I was responding to analyticalchick!

ToBeClear I disagree- I think I’m this scenario with a no deal Brexit, interest rates will have to rise

Why can’t people see this is all about getting Boris (or god forbid Rees-Mogg) into power. A no deal Brexit will be the result of political power play and not in the national interest. Hopefully we will get a deal or cancel it all together.

The market is hugely overpriced in terms of the ratio of house prices to incomes. Im fact, it has never been more overpriced. The only places that are not overpriced are remote places like the Outer Hebrides.

Here's the article in the DT today about this. I've copied and pasted it, as it's behind a paywall.

The Governor of the Bank of England has been accused of wanting to spread “gloom and despondency” about Brexit after he claimed house prices would crash by up to 35 per cent in a no-deal Brexit.

Mark Carney told the Cabinet on Thursday that in a “worst case scenario” Brexit mortgage rates would spiral, the pound would plummet, inflation and interest rates would rise and millions of homeowners would be left in negative equity.

He was challenged by both Remainers and Leavers in the Cabinet, who questioned his methodology and pointed out that he had not taken into account what the Government could do to avert such a scenario.

It came on the day that the Government published its latest batch of 28 no-deal preparation papers, which contained details of how passports, driving licences and mobile phones would be affected.

Mr Carney, who is widely perceived as a Remain supporter, spent 10 minutes addressing the three-and-a-half-hour Cabinet meeting, convened to discuss no-deal planning, and outlined Bank of England modelling for various Brexit outcomes.

He said the Prime Minister’s Chequers proposal would lead to an upgrade in growth forecasts because it would be a better than expected Brexit result, but set out a series of increasingly dire predictions for no deal.

He said that house prices would fall by 35 per cent over three years in a “chaotic” no-deal Brexit, and by 25 per cent if there was some co-operation between Britain and the EU.

One Cabinet source said: “There was a lot of pushback from around the Cabinet table. Ministers on both sides of the Brexit debate were asking him how he had got to those numbers and pointed out there was no input from policy makers.”

David Jones, the former Brexit minister, said: “The fact is that the economy has defied the predictions of many Remainers and is doing well, with record levels of employment.

“Mark Carney should stop going around spreading gloom and despondency and concentrate on the benefits of Brexit.”

Analytical - in the event of a general fall you seem to think that all of the planets would also align in your specific favour regards housing.

But a house price fall on this scale would impact the whole economy severely. How would you afford that 'cheaper' house if your employer laid you off and then getting another job was hard because unemployment rises?

bluekittens agree - David Davis, Cameron and Farage have a f of a lot to answer for...it's a farce and so upsetting to see this idiocy being played out.

Interestingly its been noted by the FT that there was no hostility or challenge to what MC was saying whereas the Sun have spun it quite differently.

@10degreestostarboard High house prices are a big drag on the economy. It would benefit the economy if they returned to a normal long term average ratio that is not a drag on the economy.

Bluekittens Brexit is such a catastrophic error as it risks both peace How does it risk peace? NATO is still there and the last time I checked, NATO guarantees the peace in Europe, not the EU.

10degreestostarboard yes this! No one considers the braoder scale impact. We have forgotten all too quickly the crash of 10 years ago. Ironic really given the anniversary of the Lehmans collapse just yesterday...

Carney was Osborne's poodle and is Hammond's as well. I take everything he says with a very, very, large container of salt.

Analytical clearly you don't understand negative equity and the issues that come with it

analytical - I agree, but there is a world of difference between a 35% fall and the gradual correction (that we are really seeing now) by degrees

The economy has been needing lower house prices, higher interest rates and a lower £ exchange rate for quite some time.
The short term impact can disadvantage some ie those that have bought property at a high price etc but longer term it's actually not a bad thing at all.