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Britons are rushing to secure new mortgages ahead of the EU referendum over fears a run on the pound in the event of a Brexit will cause the Bank of England to hike interest rates, according to a lender.
Several investment banks, including Goldman Sachs and Citi, predict that a 'leave' vote will see investors flee and clip a fifth off the value of sterling, which has already fallen since Prime Minister David Cameron formally announced the 23 June date of the referendum.
The Bank of England is looking to raise its base interest rate from the all-time low of 0.5%, where it has sat since 2009, to stimulate the economy while it recovered from the financial crisis. Policymakers have so far held back because of concerns about the state of the global economy, in particular debt-laden emerging markets and turmoil in the Chinese stock market. But a run on the pound sparked by a vote for Brexit may force them into action sooner than they would have liked.
Since campaigning in the EU referendum began, lender deVere Mortgages said it has seen a 30% increase in the number of enquiries from potential customers. "We attribute this uptick largely to the fact that the In Campaign has been keen to point out, and effective in doing so, that mortgages could become more expensive if Britain leaves the European Union following June's referendum," said Mike Coady, Managing Director of deVere Mortgages.
"If the UK votes to leave the EU, Britain's very large trade deficit may cause a run on sterling and, as such, require the Bank of England to introduce higher interest rates to stem it. Of course, this would have the consequence that mortgages will become more expensive as lending rates rise.
"Clearly, no one can predict the outcome of the referendum, but it seems that the possibility of the fallout of Brexit is fuelling a surge in mortgage enquiries. People are rushing to apply for and lock-in a mortgage now as a precaution in case interest rates go up and mortgages become more costly. I believe we can expect this surge in mortgage enquiries to intensify as we approach the vote."