On June 23, 2016, the United Kingdom made history as voters decided to leave the European Union. While this means many things for the people living in the U.K., Americans may be wondering what effects Brexit will have on the U.S.
Low rates save money
One significant impact Brexit has already triggered is the change in interest rates. According to Jonathan Smoke, chief economist at Realtor.com, qualifying home buyers can buy a home that is as much as 8 percent more expensive than what they could afford just six months ago.
This is because mortgage interest rates have fallen to their lowest point seen in years. Bankrate reported that rates in the week ending on June 30 fell to 3.61 percent for an average 30-year mortgage from 3.73 percent the week before. One month prior, that rate was 3.81 percent and a year ago it was 4.19 percent.
A 15-year fixed-rate mortgage has an even lower average interest rate, coming in at 2.89 percent. This is down from 2.97 percent the week before. Adjustable-rate mortgages also saw a drop. Five-year ARMs averaged 3.06 percent during the week ending June 23, but during the last week of the month, they fell to 3.01 percent.
These may look like small changes, but they have big effects for a home buyer’s long-term finances.
Long-term effects unclear
The reason behind the dramatic effects Brexit will have on American mortgage rates comes down to lenders’ confidence that consumers can financially handle higher rates, The Washington Post explained. Since things are changing on a global scale, industry leaders worry that U.S. home buyers will be affected and may not be able to afford higher rates. Thus, they are pushed down.
There aren’t clear answers about how Brexit will affect markets going forward. It could take up to two years for all of the effects to take place. The Post reported some industry experts predict the market will rebound fairly quickly, with interest rates nearing 4 percent by the end of the year.
“Now is a very opportune time for first time home buyers to move quickly.”
Others think Brexit could have more long-term effects. Regardless of predictions, however, it is clear that now is a very opportune time for first time home buyers, or anyone else hoping to secure a low cost mortgage, to move quickly.
“If you’re a borrower, don’t wait to lock your rate, as this opportunity may not last long,” advised Greg McBride, chief financial analyst at Bankrate, according to the Post.
Michael Fratantoni, chief economist for the Mortgage Bankers Association, explained that these changes will likely have an impact on other lending products as well.
“Our best guess at this point is that the impact on the mortgage market will be to keep mortgage rates lower for longer, likely leading to another pickup in refinance activity,” he explained.
For now, prospective home buyers and home owners looking to refinance their mortgage should move fast for some of the lowest rates that may be offered.
To learn more about what rates you qualify for, contact the experts at Lenox/WesLend Financial or call 844-225-3669. As heard on the radio, it’s the biggest no-brainer in the history of mankind.