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What Does Brexit Mean for Britain?

Written by James Drury on 24 June 2016.

 

The results from Newcastle last night around midnight, were the first indication that all was not well with the Remain vote. The North East powerhouse was predicted to be a strong Remain supporter given the high student population but when the result came in 50.5%/49.5%, it was clear the Remain vote may not hold up nationally. 

Result after result confirmed this and once Sunderland came in at 61%/39%, the markets became jittery with sterling falling from 1 dollar 50 to 1 dollar 35 within minutes. The lowest exchange rate since 1985. It was expected to land with a 6% point difference in favour of Leave, but instead mustered a 22% margin.

The FTSE futures fell dramatically and the Nikkei opened 8% down as Asian markets opened. The UK stock exchange witness falls of 35% for Barclays Bank, Aldermore fell 22%, RBS declined 28% and housebuilders have been crippled. They have bounced slightly but remain significantly down.

There has been a shift toward buying Gold and a there has been a real flight to safety as the market assesses the risks. The Prime Minister has resigned and Labour MP’s have tabled a motion of no confidence in Jeremy Corbyn. Standard and Poor have moments ago announced that that

For our Capital Fortune borrowers we expect interest rates to remain low for a much longer period, with economic uncertainty at least continuing for at least 2 years whilst negotiations on leaving take place.

Bank Rate are already close to zero, and we don’t see them changing much. Importantly, many lenders may be able to bring in cheaper funding given the fall in gilt yields reducing further the costs of longer term funding. We believe there will be more competition now on price, especially with fixed rates.

There has been some evidence of buyers holding back on house purchases, awaiting the referendum decision and we feel many buyers in the process may seek to use the current uncertainty to negotiate prices downwards.

We believe there will be some potential falls in house prices, but the low interest rate environment, over supply of mortgages and the housing shortage may offset any major falls. Our view is that this may be most felt in London and the South East.

The impact on foreign investors who have been responsible for much of the property boom is less known. The political uncertainty may see more flight to safety and we would urge the Government to now consider a revision of its stamp duty increases because this may further exacerbate the market.

The Leave result has huge implications across all 27 Eurozone countries increasing uncertainty in the French presidential elections next year and Italy the year after. Holland has already announced it wants to put membership to its populace following the UK result.

The euro itself will now likely come under increased pressure and whilst the pound is coming under this initial pressure, in comparison is should hopefully fair better in the near term.

We wonder whether following exit, the FCA will reverse the new mortgage rules introduced in March under the Mortgage Credit Directive. We hope that the definition of a foreign currency mortgage can follow a more appropriate definition and not be so restrictive, denying many borrowers paid in a foreign currency, access to lenders.

The future is uncertain but what is important is that the country seeks to unite. There will be inevitable concern with any seismic change in the political and economic landscape and the Kingdom today does feel less united, than it did yesterday. We are a resilient people and together, we will no doubt let the dust settle and fathom a way through these new and unchartered, waters.

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