4 Things You Should Know About Brexit and Mortgage Rates
So you're an American — why should you worry about England leaving the European Union? Here are a couple of reasons why this is important information to consider. Depending on whom you talk to, some experts say that this decision will have a long-term effect on the economy while others say that the effects will be more short term. Either way, the effects are worth watching.
Home Mortgage Rates Will Fall
Home mortgage rates tend to follow the same trends that the U.S. Treasuries do. Mortgage rates are also heavily influenced by the yield on 10-year Treasury notes, and investors have turned to these to leave behind instability in other foreign stock markets. So, in the wake of Brexit, the Treasuries fell. In turn, home mortgage rates also took a dive.
As rates fall considerably, this will make it easier for homebuyers to finance their home purchases. This will make the housing market more robust than we've seen in years.
Investors Can Influence Mortgage Rates
Investors, both international and domestic, can have a drastic effect on mortgage rates. Because they invest, they influence the mortgage-backed security market, which in turn influences mortgage rates. Since mortgage securities are arguably among the most stable investment markets, they attract buyers when economies and markets abroad are a bit shaky and unpredictable.
Mortgage rates are also heavily influenced by the yield on 10-year Treasury notes, and investors have flocked to them to escape turbulence in foreign markets. Many facets work together to drive down these home mortgage interest rates to historic lows.
The Price of Your Home Could Appreciate
With falling mortgage rates in the wake of Brexit and the U.S. economy doing the best it's done in years, this could lead to more demand for American real estate, especially in major city hubs.
Because investors may be looking to leave the London housing market behind in the wake of Brexit, the demand for U.S. properties may grow and consequently drive up the price of your real estate, especially smaller properties such as apartments and condos. So, if you're looking to sell, now may be the ideal time.
Any Fed Rate Hikes Are Definitely Out of the Question
In the wake of interest rates plummeting to historic lows, Americans are wondering whether the Fed will conduct similar rate hikes as those seen in December 2015. However, with the results happening from the Brexit event, it is very likely that interest rates will continue to stay consistent and low.
The Fed does not have any immediate plans to raise the rates — at least for the rest of 2016, which is good news for buyers and investors looking for new real estate properties. But as with any economic situation, the status quo can change quickly, so keep an eye open for developments.