As you may know, Britain voted recently to leave the European Union – this was coined Brexit – which caused immediate instability to the world’s financial markets. The European Union – often known as the EU – is an economic and political partnership of 28 European countries that was formed after the end of World War Two. The idea was that countries that traded together were less likely to go to war again against each other. It has its own currency – the euro – which is currently used by 18 of those countries.
Helping to settle down the markets, Britain and the EU are working on an exit strategy that will last from two to seven years depending on what they end up agreeing upon. Of course the housing and mortgage markets were going to be impacted by this event, and there was great concern over what would happen with mortgage rates and how that would impact the housing market. When there is uncertainty outside of the US, investors move to safer investments – US mortgage-backed securities being seen as one of them. A higher interest in US mortgage backed securities usually results in lower mortgage rates.
So after one month, what exactly has been the impact on mortgage rates?
As reported by our good friends over at Keeping Current Matters, “initially, rates did fall. However, Freddie Mac has reported that rates have stabilized and have actually increased marginally each of the last two weeks. This prompted Freddie Mac Chief Economist Sean Beckett to say:
“Post-Brexit volatility tapered off over the last two weeks, allowing interest rates to bounce back a bit from their near-record 30-year mortgage rate lows.”
And, Capital Economics Property Economist Matthew Pointon believes rates will continue to increase:
“Given we expect Brexit will have a minimal impact on the U.S. economy, we see no reason to change our forecast for mortgage rates to reach 3.85% by the end of this year, and 5.0% by the middle of 2018.”
We will continue to follow the effect of Brexit on the U.S. housing market. But for now, it appears the impact is not as dramatic as some thought it could be.””
Let us know if you have any questions about the mortgage market or are interested in talking to a mortgage professional. We have numerous preferred mortgage partners we both know and trust and would be happy to share their contact information with you!