Mortgage rates will rise and house prices fall if Britain leaves the European Union without a trade agreement, the Association of Mortgage Intermediaries (AMI) warns. A cautionary advice that comes as Theresa May’s cabinet intensifies its no-deal preparations.
AMI said preparing for the worst may be necessary. “A hard Brexit or deal that falls short of certain crucial trade agreements could cause GDP to crash in the UK and result in hundreds of thousands of British workers losing their jobs,” the trade body added in its quarterly economic bulletin.
The trade body also feels that the BoE is underestimating the negative impact of a no-deal Brexit as it is predicting that GDP will increase by 1.75% on average in the next three years.
“Is this a triumph of hope over reason? We cannot see the tangibles to justify the Bank’s position.”
It said though Mr Carney may not have intended to “stir up the storm” with his remarks that a no-deal Brexit could cause a drop in property value of 30%, he was right to sound a “warning bell”.
Carney said in September that failure to reach a deal with the EU could trigger a collapse in house prices in a worst-case scenario.
At the same time, scrapping the Help to Buy scheme could have a detrimental impact on the housing market, it warned.
If the initiative is not extended, the loan to value (LTV) on new build mortgages are likely to fall back as approvals on purchases “stumble”.
The effect would be further pressure on remortgages to sustain lending, as values on new build properties fall.
Preparing for Brexit
The cabinet will now have specific weekly updates on Britain’s preparations for Brexit amid concerns the country will not be ready by the time it leaves the EU March next year.
Britain is drawing up plans to charter ships to bring in food and medicines in the event of a “no-deal” Brexit next March, in a move greeted with disbelief at a stormy meeting of Theresa May’s cabinet on Tuesday, the FT reports.
Ferry and freight firms will be urged to plan alternative routes for drugs and other vital supplies if a no-deal Brexit blocks cross-Channel traffic.
The suppliers will be told to use Belgian and Dutch ports if blockages at Calais threaten to delay shipments.
Border disruption following a no-deal Brexit could create serious security weaknesses and be exploited by organised criminals, according to a leading government watchdog, which said ministers are rapidly running out of time to prepare for wider frontier problems after departure, according to The Guardian.
Noting that many businesses are also largely unprepared, the National Audit Office (NAO) said there could be significant problems even if a Brexit deal is agreed, given continued uncertainty over how any agreement might work.