Mark Carney, the Bank of England’s Governor, has issued a stark warning that a no deal Brexit could set the housing market dominoes in motion, culminating in a significant and prolonged crash.
Among the headline figures that were discussed during a meeting with governors, was the possible scenario that house prices could fall by 35% over a three-year period.
Speculation is constantly building, in part, because so little has been finalised. Despite leaving on March 29th, we have no detailed exit agreement, with many back bench rebels threatening to vote down any potential deal if it is deemed to be against Britain’s best interests.
Mark Carney, the Bank of England’s Governor, has said: “Our job is to prepare for the worst, not hope for the best,”
“By identifying the risks and coming forward with solutions, the Bank is working hard every day to get our financial system in shape for Brexit, whatever form it takes.”
However, many commentators have been sceptical of Carney’s reported comments, with many insinuating they are founded in little facts. Others suggest that the comments had actually been taken from one of three possible scenarios that the bank had hypothesised in the event of a no-deal scenario; with the reported claims being taken from the worst-case situation.
Richard Tice, Co-chair of the “Leave means leave” group, said: “Carney has made himself a laughing stock in the City with such an outrageous warning.
“Carney is a political central banker who is talking down the country and talking down Brexit in the hope that people accept a really bad Brexit deal – May’s Chequers deal.”
Simon Finch, Chief Economist at Panmure Gordon Merchant Bank, said: “Carney’s reported comments on UK house prices are not remotely credible but I also think it was highly unlikely they were made as reported.”
When house prices reached their lowest ebb in March of 2009, they had collapsed by 19% from their highest peak. A 35% decrease that would almost double the catastrophe of the financial crisis and is almost certainly a dooms-day scenario that may never come to fruition.
In the years following the referendum of 2016, house prices have enjoyed consistent growth of 7% which could indicate the market is more receptive to change than could be anticipated.
Although the newspapers had only reported unofficial comments, the Government will need to pay attention to and anticipate the worst-case scenario to avoid the house market and UK economy spiralling into economic uncertainty that could have repercussions that surpass the 2008 collapse.
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