What Brexit Means to the U.S. Economy - Lower Mortgage Rates Possible

By
Real Estate Agent with Keller Williams Capital Properties DC AB15253

Interest rates already are very low. In June 2016, 30-year fixed-rate mortgages have stayed around 3.7 percent, nearly a three-year low. Now there is a strong possibility that rates will go even lower because Britain has voted to leave the European Union.

 

International concerns, particularly slowing growth in China and the European Union, have played a major role in driving down mortgage rates. 30, 20, even 10 years ago, international issues did not impact US mortgage rates as they do now. 

 

As the Washington Post noted today, international and domestic investors impact mortgage interest rates through the mortgage-backed security market. Because these securities are considered relatively stable, investors move to them when economies and markets elsewhere flounder. Mortgage rates are also heavily influenced by the yield on 10-year Treasury notes, and investors have embraced them to as turbulence in foreign markets has been growing. Together, they have driven down mortgage rates for Americans.

Early Friday, as global markets reacted to the Brexit vote, investors bought gold, driving up the price.

Domestically, the US economy is healthy with unemployment levels down to August 2007 numbers and wage growth nearing pre-recession levels.  Still the jobs report earlier this month showed that job growth was minimal in May.  Following the release of that report on June 3, interest rates fell about a tenth of a percent, according to a report released Tuesday by financial service investment firm Compass Point. They had climbed to 3.81 percent by June 1, but dropped to 3.74 percent the following week, and now are at 3.73 percent.

As a result of all these concerns, the Fed voted in June to hold the benchmark interest rate at its current level. They had increased it by 0.25 percent in December, the first time since 2006, and said at the time that the Fed expected to raise rates at least four more times this year. Now, the Fed is saying it only two more increases.

Following the Fed vote to hold the benchmark interest rate at its current level, yields on 10-year Treasury notes fell to levels not seen since 2012.  Mortgage rates will probably drop even further with Brexit.  

The vote by the UK to leave the EU is not an abstraction for us here in the United States.  Will the world keep spinning - of course. Will there be some fall out from the UK leaving the EU? Of course.  Will it affect us in the US? Of course.  We are part of a global economy now, and even the mortgage on 123 Main Street, Smalltown, US, is affected by that global economy. 

 

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Rainmaker
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Ryan Huggins - Thousand Oaks, CA
https://HugginsHomes.com - Thousand Oaks, CA
Residential Real Estate and Investment Properties

Hi Lise.  Interesting thing is, I woke up to one email already from a mortgage guy advertising the "lowest rates ever thanks to Brexit."  I guess the lenders already had their marketing ready, but it had no facts.  I like your article better, it has facts!

Jun 24, 2016 02:02 AM #1
Rainmaker
1,530,149
Gary L. Waters Broker Associate, Bucci Realty
Bucci Realty, Inc. - Melbourne, FL
Fifteen Years Experience in Brevard County

It s interesting how this vote "surprised" a lot of people. Change always causes a ripple effect.  Change is not always bad. Have a great day!

Jun 24, 2016 02:14 AM #2
Rainmaker
3,324,770
Sally K. & David L. Hanson
EXP Realty 414-525-0563 - Brookfield, WI
WI Real Estate Agents - Luxury - Divorce

Onward and upward and mortgage lenders everywhere are sounding the  trumpets !

Jun 24, 2016 02:32 AM #3
Rainmaker
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Curtis Van Carter
Better Homes & Gardens Wine Country Group - Yountville, CA
Your Napa Valley Broker Extraordinaire

Lise

Thanks for lending a calm voice to the bit of craziness in the markets. My stocks are down just a little. Just sorry I didn't buy a couple of puts yesterday. cheers cvc

Jun 24, 2016 02:38 AM #4
Ambassador
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Kathy Streib
Room Service Home Staging - Delray Beach, FL
Home Stager - Palm Beach County,FL -561-914-6224

Hi Lise- Jim Cramer looks at this as a buying opportunity! And there's always a knee-jerk reaction by investors. 

Jun 24, 2016 03:26 AM #5
Rainmaker
1,317,786
Sheri Sperry - MCNE®
Coldwell Banker Residential Brokerage - Sedona, AZ
(928) 274-7355 ~ YOUR Solutions REALTOR®

Hi Lise Howe - Stayed up late this morning to hear the Prime Minister's response. I think this may be the start of the unraveling of the EU.  We shall see...

Jun 24, 2016 06:29 AM #6
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George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Lise as I commented on another blog earlier, when the stock market gets bumpy, MBS become very attractive and as a result lower interest rates.

Jun 24, 2016 11:51 AM #7
Rainmaker
4,798,170
Gabe Sanders
Real Estate of Florida specializing in Martin County Residential Homes, Condos and Land Sales - Stuart, FL
Stuart Florida Real Estate

Hi Lise.  The rates may go lower, but if the savings of folks gets lower as well, many will not have a down payment.

Jun 25, 2016 09:15 PM #8
Rainmaker
5,620,130
Roy Kelley
Realty Group Referrals - Gaithersburg, MD

Thanks for sharing this perspective. I would not bet on mortgage rates going lower for the long term.

Jun 25, 2016 09:28 PM #9
Rainmaker
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Grant Schneider
Performance Development Strategies - Armonk, NY
Your Coach Helping You Create Successful Outcomes

Good Morning Lise - the short term effects of Brexit should certainly be lower rates.  We shall see how this plays out.

Jun 25, 2016 11:19 PM #10
Rainmaker
829,165
Sheila Newton Team Anderson & Greenville SC
Berkshire Hathaway HomeServices - C. Dan Joyner - Anderson, SC
Selling the Upstate since 1989

Hello Lise - It will be interesting to see the long term effects with all this!!

Jun 26, 2016 10:39 AM #11
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Debbie Reynolds
Platinum Properties - Clarksville, TN
Your Dedicated Clarksville TN Real Estate Agent

I find this very interesting and can see the strategy. I will be watching closely to see what happens.

Jun 26, 2016 12:42 PM #12
Rainmaker
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Winston Heverly
Winston Realty, Inc. - Atlantis, FL
GRI, ABR, SFR, CDPE, CIAS, PA

A nice informed post pertaining to an important subject matter. I'm glad I came across it in the archives.

Jul 23, 2016 10:31 PM #13
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Lise Howe

Assoc. Broker in DC, MD, VA and attorney in DC
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