BREXIT would cause house prices across the UK to fall by as much as 18 per cent and push mortgage rates up, George Osborne has warned as the UK Government intensified its campaign for Britain to stay in the EU still further.
The chancellor, speaking at a meeting of G7 finance ministers in Japan, said that Treasury analysis estimated a vote to leave would mean people’s homes would lose at least 10 per cent of their value and possibly nearly 20 per cent. Vote Leave described Mr Osborne’s claim as “extraordinary”.
The Treasury pointed out that with the average UK home costing £292,000 and the Office for Budget Responsibility predicting rises of 9.4 per cent over the next two years, this would be the equivalent of depressing the value of a typical residential property by between £32,000 and £57,500 by the middle of 2018 with much higher losses for more expensive homes.
The forecast says Brexit would not only wipe out the expected increase in property values but also leave homes worth up to 8.6 per cent less in cash terms than they are now.
"If we leave the European Union, there will be an immediate economic shock that will hit financial markets," declared Mr Osborne. "People will not know what the future looks like and, in the long term, the country and the people in the country are going to be poorer.
"That affects the value of people's homes and the Treasury analysis shows that there would be a hit to the value of people's homes by at least 10 per cent and up to 18 per cent. And at the same time first-time buyers are hit because mortgage rates go up, and mortgages become more difficult to get. So it's a lose-lose situation.”
The chancellor said everyone wanted affordable homes and the way to get them was by building more houses. “You don't get affordable homes by wrecking the British economy. And of course if we left the EU, mortgage rates would go up, it would become more difficult to get mortgages so they'd be hit as well."
In April, Mr Osborne warned that Brexit would mean on average every British household would lose £4,300 a year and the economy would lose six per cent of its value; to fill the financial black hole left by a fall of £36bn in tax receipts would cost the equivalent of a rise of 8p in income tax, he claimed.
Mr Osborne said that finance ministers from the other G7 countries - Japan, the US, France, Germany, Italy and Canada - had all told him that Brexit would harm the UK economically, while his French and German counterparts had made clear that the UK could expect to get a worse deal on trade than is available to EU members.
"Everyone here at the G7 in Japan is clear…it would be bad for the British economy if we left the European Union," stressed the Chancellor.
But energy minister Andrea Leadsom, a leading Brexit campaigner, said the Chancellor’s claim on house price falls was extraordinary, expressing amazement Treasury civil servants would be prepared to make it.
“The truth is that the greatest threat to the economy is the perilous state of the Euro; staying in the EU means locking ourselves to a currency zone, which Mervyn King, ex-Governor of the Bank of England, has rightly warned 'could explode'. The safer option in this referendum is to take back control of the vast sums we send to Brussels every day and Vote Leave on 23 June."
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