George Osborne has warned mortgage rates would increase if the UK leaves the European Union increasing the cost to homeowners.

The Chancellor has said he thought it is likely interest rates would rise if the UK leaves the European Union as he would expect sterling to fall pushing up the cost of imports.

The Bank of England sets interest rates and has an inflation mandate to achieve. Any rise in prices would mean the monetary policy committee (MPC) would need to act to control inflation by increasing interest rates.

Borrowers such as first time buyers, home movers, remortgage buyers and buy-to-let landlords have benefitted from record low mortgage rates.

For remortgage buyers currently on your lenders standard variable rate, to reduce costs you can switch to a new mortgage deal helping you with lower monthly repayments.

However, city analysts believe it would be very unlikely for interest rates to rise if the UK vote to leave and two thirds think an interest rate cut could be possible to boost confidence.

Property market uncertain with Brexit

A recent survey by KPMG including 25 global real estate investors with assets of $400 billion shows two thirds believe Brexit would result in less international investment into the UK property market.

To date only one third of the investors surveyed have reduced or plan to reduce investment before the referendum.

If the UK votes to leave the EU, two thirds would slow down investment to the UK property market during the period of uncertainty while new terms are negotiated with Europe.

Andy Pyle, head of real estate for KPMG said this period of uncertainty would be potentially immediately damaging to the UK real estate market compared to a stable post-Brexit world.

Investors are more positive about the long term with only one third saying their organisation would be less likely to invest in UK property post-Brexit.

London homes likely to remain popular

Homes in London are likely to remain popular with international investors after a Brexit vote as the capital is attractive as a safe haven, for economic stability, a history of strong property price rise and a vibrant culture.

According to a study by Frank Knight 49% of all prime London homes were sold to foreign buyers and 28% did not live in the UK.

If sterling does fall with a Brexit vote it would make London property even more affordable to foreign investors so the government may need to rules to control these purchases.

New rules restricting immigration could help to raise property prices in London as data from the Home Builders Federation shows labour shortages and costs to be constraints on new build home production.

Even so, for older homeowners the considerable value in their property offers the equity release mortgage buyer access to money for home improvements or help children start or expand a business.

A fall in house prices would be welcomed by first time buyers struggling to buy their first home in London.

For home movers wanting to trade up when prices are falling, they may find the gap to their next property decreases which means they need a smaller deposit or mortgage.

What are your next steps?

Talk to our London City Mortgage brokers for advice if you remortgage your existing home and want the best mortgage deal or release capital, buying your first home, moving home or are a buy-to-let investor.

Start with a free mortgage quote or call us and we can take your details. Learn more by using the equity release calculator, mortgage monthly cost calculators, and property value tracker chart.

For older homeowners releasing equity from your property, our LCM mortgage advisers can recommend the lifetime mortgage, accessing wealth to maintain your lifestyle or even buy a more expensive home.

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