When Britons voted to leave the European Union on July 23, 2016, in a referendum commonly known as Brexit, the impact on the British economy — and on Europe’s too — was immediate. Here across the pond, though, it’s not been totally clear how Brexit would affect the U.S. economy, and in particular interest rates tied to mortgages.
A month later, we have a better understanding of how Brexit affects you and your business personally. Here are some of the benefits Brexit is bringing us [and a drawback too].
- Mortgages will get cheaper. As the impact of Brexit hits our shores, one of the effects is to drive down stock prices, making the safety of bonds look far more attractive. And when bond rates drop because the market is being flooded, interest rates drop as well. Experts indicate that this flood of money into the bond market should delay the Fed’s raising of interest rates, which had been anticipated to happen at least once this year.
- Homes will get more expensive. This is great news for sellers — and for your commission as well. Low interest rates mean more people can get qualified for a loan, flooding the market with wannabe homebuyers and driving prices higher.
- Buyers can shop for bigger houses. This seems to contradict No. 2, but right now, lower interest rates also mean that your clients can borrow more money, and it could get them into a home that was previously out of their reach. It’s true that rising home prices will impact this ability, but they haven’t taken off yet, so counseling your clients to buy now is a smart move.
- Brexit could spark a recession. And that’s good for no one, if the economy destabilizes and incomes freeze or even drop. But having survived one recent market downturn, the country is in a better position to stave off another.
There’s no guarantee, of course, when the market will right itself and the immediate impact of Brexit abates. And there’s no knowing whether a more stable European economy will allow interest rates Stateside to begin to climb again. That’s why your homeshoppers need to make their move now and get into a new home while rates are low, home prices have not yet begun to climb and their dollars go further.
If you’d like to further discuss the impact Brexit will have on the U.S. economy and the housing market in particular, I’d love to get together and see how we can help our clients make the most of this surprising turn of events in the global market.