On Wednesday the Queen approved new Prime Minister Boris Johnson’s request to suspend Parliament for almost five weeks ahead of Brexit.
The pound has fallen sharply as a result, though EU officials have stated that this unexpected move may reduce the chances of a no-deal split.
Here we’ll summarise the controversial parliament suspension, as well as the current state of the property market and how this could impact homeowners, buyers and investors.
Summary and key developments of the UK Parliament suspension
Parliament suspension: 28/08 Queen Elizabeth II approved the UK government’s request to suspend Parliament. Parliament will be suspended for five weeks just days after MPs return from summer recess (currently either September 9 at the earliest or September 12 at the latest) until October 14, just weeks before Brexit which is planned for 11pm on October 31.
What it means for Brexit: In a recent article, Vox’s Jen Kirby neatly described what the suspension means in practice: “It gives Parliament a much narrower window to a) debate, scrutinize, and pass a Brexit deal if there’s one on offer; or b) stop the UK from exiting the European Union without an agreement in place on October 31.”
Essentially, Johnson’s bold move will make it much harder for opposition lawmakers to block a no-Brexit deal.
Why this is happening: Boris Johnson has asked to shut down Parliament for this period so his government can work on delivering a Queen's Speech on October 14 – when the suspension ends - which will lay out the government's agenda for the parliamentary session.
The Prime Minister has denied that the parliament suspension has anything to do with the national crisis over Brexit. In a letter to lawmakers, which you can read here, the prime minister said this legislative session has to “be brought to a close” as it’s one of the longest in history. He explained that “The current session has lasted more than 340 days…. (and) in almost 400 years only the 2010-12 session comes close, at 250 days.”
He continued to say that his decision to suspend Parliament was aimed at pushing through domestic policy: “We will help the NHS, fight violent crime, invest in infrastructure and science, and cut the cost of living.”
However, not many MPs are buying Johnson’s letter. The speaker of the House John Bercow has even called it “a constitutional outrage”, adding “However it is dressed up it is blindingly obvious that the purpose of prorogation now would be to stop Parliament debating Brexit and performing its duty.”
So, what does this mean for the property market? And what are the current market conditions?
Mortgage approvals are at their highest level since February 2017, with buyers racing to complete before October Brexit deadline
Efforts to complete house purchases before Brexit are giving the market a temporary boost, a top economist suggests.
According to banking trade body UK Finance, UK mortgage approvals for house purchase rose to the highest level in two and a half years in July.
The company’s industry data revealed that the number of mortgages approved for this purpose stood at a high of 43,342 in July (when adjusted for seasonal variations), which is up 1.3 per cent on June. That is the highest number since February 2017.
Clearly, home sellers are concerned about the impact Brexit will have on buyer activity and property prices, and Johnson’s prorogation is unlikely to settle this sentiment.
Sound familiar? If you are in a rush to complete a house purchase, give us a call on 0207 099 4000 to find out how we can make it happen. It also may be helpful to check out our video which shows how interior staging helps sell your property quickly for the best price, plus how you can make money from your property until it sells.
Homeowners are also rushing to re-mortgage pre-Brexit
When looking at mortgages approved by high street banks on the whole, rather than just mortgage approvals for house purchases, UK Finance’s data is particularly noteable.
According to the report, a staggering 95,126 mortgages were approved by the main high street banks in July just gone. This represents the highest monthly total since July 2009, when the country was still suffering from the effects of the financial crash. In 2009, the figure was only slightly higher at 99,970.
Interestingly, UK Finance’s report showed that the biggest increase was for re-mortgages, which were up 19.4% annually.
Why are the nation’s homeowners remortgaging?
There are two main reasons why homeowners decide to re-mortgage:
1. To get access to a larger choice of lenders and secure a better deal
If your current mortgage rate is coming to an end or you think you could get a better deal, consider remortgaging, (you can do this through Portico Finance and we’re happy to chat through your options with you 0207 731 9680).
But before you do, make sure you get your property revalued (you can get an instant property valuation by clicking here, or give us a call and one of our friendly Managers will pop over to give you an official valuation). This will make your lender recalculate your loan to value, and a lower loan to value means a better interest rate and a larger choice of lenders.
2. To borrow extra money
The latest data from UK Finance showed that there were 21,370 new re-mortgages in May where the homeowner borrowed more than their original mortgage. This is a rise of nearly 20% when compared to the same month the previous year.
Mortgage expert Andrew Montlake believes this rise is a result of more people deciding to stay in their property and re-mortgage than move home (perhaps because of the uncertainty regarding the Brexit deal and how our exit will affect property prices). He explains: “The 20% increase in remortgages with additional borrowing confirms how a lot more people, given the uncertain climate, are seeking to add value to their existing homes rather than move.
With mortgage rates so low, many people see extending and renovating their existing homes as a strategic move. They’re playing percentage property.”
‘Frenzy’ of foreign investors taking advantage of the weak pound
However, those looking to get a mortgage for a house purchase in London may have competition…
In spite of plateauing property prices in the capital, (the Office of National Statistics’ (ONS) have just released an interesting price index report which you can read here if you want to see the numbers), recent reports suggest that demand from foreign investors buying property in bulk is stronger than ever.
International investors – or foreign landlords living in London but buying-to-let - are taking advantage of ‘bargain’ London house prices, a weak UK pound, and in turn, developers being more open to discounting.
Fiona Veitch, Marketing and New Business Director adds: "At Portico, we have seen a pre-Brexit summer uplift which is giving the housing market some much needed momentum, although typically summer is one of our busiest periods.
Along with the weakening of the pound, we have seen sales transactions increase, as house hunters feel they have waited long enough and are now racing to lock in deals and exchange before the looming Brexit deadline.
In fact, according to recent data, agreed house sales rose 6.1 per cent in August from the previous year, growing to the highest level at this time of the year since 2015. Mortgage approvals for house purchases have also hit a two-year high.
However, as we edge closer to the now very real October deadline and into winter, we do expect sales transactions to plateau again as the future of the UK after Brexit is thrown into uncertainty again.
For this reason, it’s more important than ever that individuals make property decisions based on their personal situation and what’s best for them, rather than gambling on how the market will play out."
Remember that the market is cyclical, and that you should make property decisions based on your personal situation
The run up to Brexit and the months thereafter will no doubt be turbulent for the London market as we await our exit of Europe and the single market and the deal reached.
Despite reports of an increase in foreign investment, we believe that we will see a continued slowdown in sales volumes.
London has a significant part to play in businesses who trade and operate across Europe and the world, and a buoyant property market relies on the UK’s economic health. If a positive Brexit deal is reached this could cause further price growth as the economy grows and we see the nation’s confidence lifted, but equally, if a good deal isn’t reached then the international companies who operate here or look to relocate here might change their minds, reducing the number of residents who live in the capital and again further reducing the transaction levels, which could ultimately lead to price decreases.
It’s therefore important that you make property decisions based on your personal situation and what you want to do, rather than gambling on how the market will play out. UK Finance’s report shows it is now easier and cheaper than ever to borrow and get on to the property ladder, and early indicators are also suggesting that the market ‘slump’ may be about to end, so it may not be smart to wait purely in the hope of getting a better deal.
If you’re considering buying, selling or letting your property, or if you have any questions regarding mortgages or remortgaging, give us a call today on 0207 099 4000 or try our online instant valuation tool.