On the United Kingdom’s vote to exit the European Union (a.k.a “Brexit”)
The Brexit vote is over, and 52 percent of UK citizens voted to exit the EU, leaving a lot of political and economic uncertainty in the UK, Europe and the rest of the world. The UK Prime Minister, David Cameron, has resigned and Boris Johnson is the leading candidate to replace Cameron.
We’ve addressed the potential upsides and downsides with Supreme’s Senior Vice President of Capital Markets, Steven Chiou.
Q: How will Brexit negatively impact economics globally?
A: Forty-four percent of UK exports go to EU countries. Those exports may now be subject to heavy tariffs and more restrictions. This means the UK’s GDP for 2016 may be now down to zero and GDP for the EU may be lowered by .25 to .50 for 2016. Stock markets plunged today while investors sold stocks and moved money into safe-haven US Treasury Bonds or Mortgage Backed Securities (MBS).
Q: Should we be concerned about global economic stability?
A: All central banks in the world have committed to providing liquidity to calm financial markets. This exit will also be a two year process, so change should come more slowly, not suddenly.
Q: What does the dip in the stock market mean for the mortgage industry?
A: The 10 year treasury gained 1.625 points in price and 30 year MBS current coupons gained .625 percent. Supreme’s rate sheet price improved from .50 percent to .75 percent this morning.* Essentially, this occurrence is favorable for the bond market and mortgage business, as the rates are going to stay low for a while.
For consumers, it’s an opportune moment to buy that dream home, or refinance loans for a better rate.
*as of 6/24/2016
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