What does a Brexit no deal mean?

The long awaited Brexit “withdrawal agreement” vote was rejected by the vast majority of MPs in the House of Commons last night Tuesday 15th January 2019, prompting what many believe will be a vote of “no confidence” in the government today Wednesday 16th January. However the Prime Minister has vowed to keep working on a deal, as there is now a possibility that we may leave with a no deal Brexit deal, or even decide not to leave the EU after all.

So where does this leave us in terms of our everyday lives, existing commitments and any short term plans that we want to make? Is now a good time to book a holiday, buy a house, or take out that unsecured loan or re-mortgage? How Brexit proof is the UK economy?

Experts have consistently warned that a housing price crisis could be on the horizon. In November 2018, the Bank of England produced a report saying that in the absolute worst-case scenario, a ‘no deal’ Brexit could lead to the economy shrinking and house prices falling by close to 30%, as well as unemployment doubling and inflation rising to 6.5%.

If as suggested by the Bank of England, the economy did shrink then initially you would expect interest rates to drop, as this makes borrowing cheaper and encourages spending which stimulates the economy. However if the pound drops due to Brexit then the costs of things from Europe will increase and this will push up inflation. The usual way to tackle this is to increase interest rates. Indeed in September 2018, governor of the Bank of England, Mark Carney suggested Brexit rate rises as a high probability.

After years of no change leading up to 2016, the Bank of England dropped the base rate, which some mortgage and savings rates are tied to in the wake of the EU referendum in order to stave off a recession. Since then, the base rate has risen twice, and now sits at 0.75%, so is this rise going to continue?

In terms of mortgage lending, rates are still pretty much as low as they have ever been so for certainty and if you can get the fixed rate deal that you want, it’s the time to do it. It may not necessarily be the cheapest thing to do, but even with a Brexit boost, rates are unlikely to drop significantly lower, so it’s worth it for the peace of mind.

Most unsecured loans rates are fixed from the start of your loan so any economic rate changes are unlikely to impact upon it. However as with current mortgage rates, unsecured loan rates are very close to the lowest they have ever been, so again now is the time to borrow. So even though rates could sneak marginally lower it’s about budgeting and planning so it’s a very good time to do so.

The opposite is true however for those that wish to save. Savings rates are also at historically low rates, but that’s not maximising your savings potential, so it isn’t worth fixing right now. If again though you prefer the certainty and peace of mind, then certainly don’t fix your savings rate for longer than a 3year period.

In terms of credit cards and the rates on offer, these are not closely linked with the UK interest rate and so will be unaffected.

Further issues from a No Deal Brexit would occur within the travel industry. The Government have already warned that there could be disruption to travel in the days immediately after March 29th 2019, and there are fears that some flights could be unable to depart. A week before the Easter holidays. If there is no agreement in place UK and EU licensed airlines would lose the automatic right to operate air services between the UK and EU, without first obtaining permission in advance. Similarly, EU licensed airlines would also lose the right to operate within the UK and UK licensed airlines would be unable to operate flights within the EU.

Therefore this means that Airlines would have to seek permissions from the relevant country. The UK Government have already said that it would always plan to grant permission to EU airlines to continue to operate, and would expect EU countries to do likewise. However, there are no guarantees. A Government document released to explain the possible impact of a no-deal Brexit says: “It would not be in the interest of any EU country or the UK to restrict the choice of destinations that could be served, though if such permissions are not granted, there could be disruption to some flights.”

At this moment in time, UK citizens can travel, live and work anywhere within the EU, thanks to the free movement of workers directive. Could this be impacted upon after Brexit?

The Government states that it has an agreement with the EU which means that free movement will continue for UK nationals until 31st December 2020 under the citizens’ rights agreement without the need for a visa. MP’s are confident that visa-free travel to Europe for short stays will continue long after 2020, as long as the UK reciprocates this for EU citizens. Indeed the European Commission has proposed that UK citizens will be able to take visa free visits to EU countries for a maximum 90 day period within a 180 day timescale, and EU citizens would be able to do the same in the UK.

However, even though visas will not be needed, UK citizens going to holiday will need a new electronic pass costing 7euros. The introduction of the fee under the EU Travel Information and Authorisation System (Etias) is due to come into effect in 2021.

Again, visa-free travel isn’t technically dependent on the UK reaching a deal with the European Union, but the EU does say it’s conditional upon the UK also granting reciprocal and non-discriminatory visa-free travel for all EU member states.

Passports are also changing. The burgundy passports with “European Union” stamped on the front will be replaced by blue passports. But you don’t have to get a new one straightaway, only when your current one expires.

At the moment, you can travel to EU countries on your passport right up to the point it expires.

However, if there’s no deal with the EU, you may need to renew your passport earlier. You’ll need to renew your passport in advance if you plan to travel to certain EU countries and your passport must have at least 6months left on it.

If it is older than nine years and six months on the day you travel, you will not be able to travel to the following countries: Austria, Belgium, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, the Netherlands, Norway, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden and Switzerland. For more info, see the Gov.uk website.

So At 11pm on 29 March 2019, the UK is set to leave the European Union (for now anyway). It’s a once-in-a-generation event which will affect everyone in the UK, their finances and consumer rights. But with MPs rejecting the Prime Minister’s proposed deal with the EU; much is still up in the air.