Speaking on Peston on Sunday Osborne gave the latest stark warning ahead of the EU vote on 23 June.
If the UK votes to leave the European Union house prices will fall and mortgage costs will rise, Chancellor George Osborne has warned.
Speaking on Peston on Sunday Osborne gave the latest stark warning ahead of the EU vote on 23 June.
He said: “I'm pretty clear that there would be a significant hit to the value of people's homes and to the cost of mortgages’ that is one example of the kind of economic impact that we get from leaving the EU.
"We're doing the work on it now but the emerging Treasury analysis backs up what you are hearing from major banks like Virgin Money that the value of people's homes will be affected and people trying to get on the housing market would be hit because mortgage costs would go up.”
But Michael Gove, secretary of state for justice, said staying in the EU would mean the UK "could lose autonomy economically" on the Andrew Marr Show.
He added: “It is clear that the European Union wants this referendum out of the way and if Britain votes to remain it wants to press ahead not just with more counties entering the euro but with a banking union and a fiscal union and it wants to exercise more control over banking regulation and taxes across Europe.”
Raoul Ruparel, co-director of Open Europe, an independent think tank based in the UK and Brussels which conducts research about the UK’s relationship with the EU, reckoned Osborne has a point about house prices but felt the comments may be overblown.
He said: “I think there is some validity to his claims but it shouldn’t be overdone. There would be uncertainty following a Brexit vote and this could hit investment, particularly at the top end of the residential market.
“Some prices might drop slightly but it’s hard to know how much this will filter through to the rest of the market. Ultimately, it depends on how big the broader economic shock is and therefore whether people feel less wealthy and less willing to buy.”
He added: “There are countervailing forces as well of course: London property remains a safe haven so an uncertain event such as Brexit could prompt some safe haven flows; additionally a weakening of the pound could, along with a price decline, quickly make the market look attractive to other foreign investors.
“I think his point on mortgages is less clear cut. I would expect Bank of England rates to at least stay lower for longer, reducing pressure on those who actually own mortgages. In terms of new mortgages and refinancing, banks and other lenders may become more risk averse and could raise their requirements to lending.
“I’d expect this would more likely manifest itself in a combination of lower loan-to-value ratios/higher deposit requirements and possibly higher rates above base, though the former to me seems more likely.
“It’s hard to know his exact thinking behind all this; we’ll get more info when the Treasury publishes its short term impact of Brexit soon.”
Ray Boulger, senior technical manager of John Charcol, who is a proponent of leaving the EU, said: “I take all of these guesses as to what will happen in the event of Brexit or indeed in the event of remaining as pure guesswork.
“The only guide one can get at this stage is what the market is doing. If you look at wholesale rates and gilt yields they aren’t going anywhere fast. The market is fairly relaxed about the situation.
“You could argue that’s because the expectation is we will vote to remain but the market hates uncertainty – if the market was majorly concerned about cutting interest rates in the even to a Brexit you would know.”
