The EU housing market has already seen major changes caused by Brexit. The first major change was a "pre-Brexit buying spree" that boosted home sales by 6.1%. The National Association of Estate Agents (NAEA) says more people are looking to buy homes before Brexit is complete. However, many people are still waiting to see what happens with Brexit before buying a home.
Although Brexit has influenced the housing market immensely, the compounding influence from the pandemic has led to seemingly contradictory data. The entire housing market isn't following the same trend. It's rather split at the moment.
On one hand, many are holding off on buying because of Brexit. On the other, many are buying because of low interest rates and the new 40-year fixed-rate mortgage introduced just this year.
Low interest rates are encouraging people to buy homes
Thanks to the COVID-19 pandemic, people have more of a reason to buy a home if they have an income and can afford the mortgage payments. Interest rates have been low and now is the best time to own a home in order to avoid being evicted by an owner who may need to use their property.
Home buyers can get a 40-year fixed-rate mortgage with 10% down
In addition to low interest rates, Britain unveiled a new 40-year fixed-rate mortgage offered by Habito that requires only a 10% down payment. Habito offers fixed-rate terms for up to 40 years and rates are calculated based on the deposit and length of the loan. For example, a 40-year fixed-rate loan with a down payment of 40% will fix at 4.2%, while a 10% down payment will fix at 5.35%.
The terms offered by Habito are hard to pass up. Borrowers are charged £1,995 for taking out the loan, however, they won't be charged a fee for repaying the loan early. This makes it easy to refinance later on or pay the loan off early.
Homeowners have been frustrated with early repayment fees, so the new loan terms are a breath of fresh air.
While rates and terms play a major role in the state of the housing market, the pandemic has played a larger role. The rent and mortgage moratoriums have hit renters and investors pretty hard.
Eviction bans are about to be lifted
The eviction ban has been extended to March 31. While it's possible another extension will be implemented, at some point, it has to end. At that time, many renters will be evicted and many property investors will be forced into foreclosure. Investors working with a property manager won't have to personally evict their tenants, but it's going to be hard either way.
As time passes, renters will continue to accumulate more debt from unpaid rent and many are already £20,000+ in arrears. Tenants that far behind won't be able to make their back payments, which means many landlords won't be able to pay their mortgages once they come out of forbearance.
The unfortunate result – when the ban finally ends – will be a massive number of foreclosures.
The future of the housing market isn't entirely predictable
Housing markets are normally predictable. However, with artificially low interest rates, eviction bans, and mortgage deferments, the only thing predictable is the fact that it will all come crashing down, ending in homelessness and foreclosures.
Beyond the obvious, it's not easy to predict how, when, or if the housing market will make a recovery. The problem is that people are out of work and social restrictions have made it impossible to operate any business at full capacity.
Whether the economy recovers or not, it's going to be harder for people to start new businesses or pick up side jobs for more income. Even if people do start a business, they won't be able to operate at their full potential unless they move their operations online. The online model works well for some businesses, but not all.
For now, Brits will just need to wait to see what happens. There are too many unpredictable factors affecting the housing market to know for certain what's around the corner.
