How the Brexit Affects Mortgage Rates

A week ago today the people of the UK voted en masse to leave the European Union (EU).  In the immediate wake of that vote, Sterling, Asian Stocks, and domestic stock futures all took a beating. Traders rushed to “safe” havens of bonds and long term, stable investments.  Nothing causes turmoil in the investment marketplace like uncertainty, and the Brexit opened the door to plenty of that.  One area that uncertainty typically helps is in lowering mortgage interest rates.  If you’re wondering how the brexit affects mortgage rates, in a simple answer, it brings them down.

Rates for all mortgage products fell drastically back down to historical lows.  Simply put, the brexit lowered rates.  When considering the big picture of how the brexit affects mortgage rates, though, the explanation is a little longer.  Domestically, it has hit our markets as a DOW that was just above 18,000 last week threatened to fall below 17,000 in the immediate aftermath of the

The Brexit has brought mortgage rates to historic lows

brexit.  It has also raised the “uncertainty” flag here in the US, as so much of the marketplace is globally linked.  In fact, the brexit had so much impact domestically that the chances of a Fed rate hike changed from “possible in June” just a few short weeks ago, to only 12% FOR THE REST OF 2016.  That means while economic weakness has been a decision driver, the brexit gave enough momentum to uncertainty and market weakness to throw a giant wrench into the Fed’s plans from earlier this year.

For now, home buyers and home owners are left with an unprecedented opportunities – rates at fresh historic lows and the possibility of taking advantage of them for a longer period of time than in previous “low” cycles, as this uncertainty around Brexit and the EU is likely to linger at the very least for a couple of weeks (in comparison, when we’ve previously hit the historic low for rates, we’ve had a window of just a day or 2 to lock in).  Those home owners who purchased using loans with PMI over the past year have an opportunity to reduce their rates and shed their PMI as the brexit affects mortgage rates enough to offer substantial savings across the board.

While the future is uncertain, the present is for sure – right now is an opportunity we may not see again to get mortgage rates in the low 3’s, and for some programs, even the 2’s.  As for the EU, the UK, and the future of Europe, things are much less clear, and will surely unfold over the coming days, weeks, months, and (possibly even) years.