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Brexit: Carney warns no-deal could see house prices plunge Brexit: Carney warns no-deal could see house prices plunge
(about 9 hours later)
The Bank of England's governor has warned the cabinet that a chaotic no-deal Brexit could crash house prices and send another financial shock through the economy.The Bank of England's governor has warned the cabinet that a chaotic no-deal Brexit could crash house prices and send another financial shock through the economy.
Mark Carney met senior ministers on Thursday to discuss the risks of a disorderly exit from the EU.Mark Carney met senior ministers on Thursday to discuss the risks of a disorderly exit from the EU.
His worst-case scenario was that house prices could fall as much as 35% over three years, a source told the BBC.His worst-case scenario was that house prices could fall as much as 35% over three years, a source told the BBC.
The comments are likely to spark anger amongst Brexiteers. The warning echoes some of the Bank's previous comments.
There were also widespread reports that the governor told the Downing Street meeting that mortgage rates could spiral, the pound and inflation could fall, and countless homeowners could be left in negative equity. The Bank of England routinely carries out "stress tests" to check whether the banking system can withstand extreme financial shocks.
According to the Financial Times a source told the paper that all Mr Carney's predictions were "grim" and "chilling". The FT said the governor took questions from ministers, but there was no hostility. Its latest one was conducted in November, when it said a 33% fall in house prices could occur in a worst-case scenario.
However, The Sun had a different take on the meeting, reporting that Home Secretary Sajid Javid and Health Secretary Matt Hancock "ripped into" Mr Carney because of his doom-laden briefing. Several reports said that the Bank governor also told the Downing Street meeting that mortgage rates could spiral, the pound and inflation could fall, and countless homeowners could be left in negative equity.
Mr Carney, who has just agreed to stay on as governor of the central bank until 2020, has faced strong criticism in the past, with Brexiteers accusing him of being part of the Remain camp.Mr Carney, who has just agreed to stay on as governor of the central bank until 2020, has faced strong criticism in the past, with Brexiteers accusing him of being part of the Remain camp.
Thursday's briefing is not the first time Mr Carney has warned that a disorderly Brexit could spark an economic shock, and it echoes some of the Bank's previous forecasts. In August, Mr Carney told the BBC that the risk of a no-deal Brexit was "uncomfortably high".
The Bank's latest annual "stress test" of the UK financial system in November warned of a 33% fall in house prices in a worst case scenario.
In August Mr Carney told the BBC that the risk of a no-deal Brexit was "uncomfortably high".
That comment prompted leading Tory eurosceptic Jacob Rees-Mogg to call Mr Carney "the high priest of Project Fear", while former minister Iain Duncan Smith said "there is no such thing as a no-deal" and the Bank "struggled to understand how this would work".That comment prompted leading Tory eurosceptic Jacob Rees-Mogg to call Mr Carney "the high priest of Project Fear", while former minister Iain Duncan Smith said "there is no such thing as a no-deal" and the Bank "struggled to understand how this would work".
Following the Downing Street meeting, the Prime Minister's official spokesman said ministers remain confident of a Brexit deal, but agreed to "ramp up" their no-deal planning. Independent property expert Henry Pryor told the BBC that Mr Carney was "not predicting Armageddon, he was not predicting house prices would fall by a third, they are just making sure that if, for some extraordinary reason anything was to go horribly wrong, the bank is prepared."
But he warned house prices were likely to fall in the first half of the 2019 as people put off buying amid the Brexit uncertainty, while the number of sellers, "driven by death, debt and divorce" would remain about the same.
Responsible planning
Following the Downing Street meeting, the Prime Minister's official spokesman said ministers remained confident of a Brexit deal, but had agreed to "ramp up" their no-deal planning.
"As a responsible government, we need to plan for every eventuality. The Cabinet agreed that no-deal remains an unlikely but possible scenario in six months' time," the spokesman said."As a responsible government, we need to plan for every eventuality. The Cabinet agreed that no-deal remains an unlikely but possible scenario in six months' time," the spokesman said.
The Bank of England declined to comment.The Bank of England declined to comment.
Roaming charges The cabinet meeting was part of a series of no-deal planning sessions designed to discuss the "unlikely" scenario that the UK leaves the EU without an agreement in place. After each meeting, planning papers are published on various subjects.
The cabinet meeting was part of a series no-deal planning sessions designed to discuss the "unlikely" scenario that the UK leaves the EU without an agreement in place. After each meeting, planning papers are published on various subjects. Phones and driving
On Thursday, the papers disclosed that UK car drivers may have to get an international driving permit if they want to drive in some European countries after a no-deal Brexit.On Thursday, the papers disclosed that UK car drivers may have to get an international driving permit if they want to drive in some European countries after a no-deal Brexit.
The government said that after March 2019 "your driving licence may no longer be valid by itself" in the EU, in its latest no-deal planning papers.The government said that after March 2019 "your driving licence may no longer be valid by itself" in the EU, in its latest no-deal planning papers.
The papers also warned that Britons travelling to the EU may need to make sure their passports have six months left to run.The papers also warned that Britons travelling to the EU may need to make sure their passports have six months left to run.
And, in an interview with BBC Political Editor Laura Kuenssberg, Brexit Secretary Dominic Raab said the government was trying to give the "reassurance that consumers need" on the issue of mobile phone roaming charges but admitted that European operators could pass on charges.And, in an interview with BBC Political Editor Laura Kuenssberg, Brexit Secretary Dominic Raab said the government was trying to give the "reassurance that consumers need" on the issue of mobile phone roaming charges but admitted that European operators could pass on charges.
He said: "No, I can't give a cast-iron guarantee. What I can say is that the government would legislate to limit the ability of roaming charges to be imposed on customers."He said: "No, I can't give a cast-iron guarantee. What I can say is that the government would legislate to limit the ability of roaming charges to be imposed on customers."