U.S. home buyers and homeowners seem to be reaping a benefit since Britain’s vote to leave the European Union – mortgage rates that are quickly dropping. Interest rates have remained at historic lows for the past several years, and rates have remained low throughout the first half of 2016. In light of the recent Brexit vote, economists expect them to head even lower.
On June 27th of 2016, the 30-year fixed-rate mortgage averaged 3.46%. This is nearly the lowest average since 2012, according to Realtor.com. “Lower rates produce lower monthly payments and greater buying power—those who are well qualified can afford a home that’s 8 percent more expensive than at the beginning of the year,” Jonathan Smoke, realtor.com®’s chief economist, writes in a recent column. “That’s more than enough to offset the rise in prices during that time.”
In a recent article, the Washington Post explained:
“Brexit has spawned the recent bout of volatility in global financial markets. That has anxious investors scurrying for safety -- and few assets are safer than U.S. Treasuries. High demand for government debt pulls down interest rates. That all translates into ultra-low mortgage rates for American households. And with Britain voting for Brexit, they could go even lower.”
"Mortgage rates will tumble," says Greg McBride, chief financial analyst at Bankrate.com, "possibly hitting new record lows. If you're a borrower, don't wait to lock in your rate, as this opportunity may not last long."
If mortgage rates continue to decline, this could help drive U.S real estate sales, including residential real estate. This drop in rates could also give new life to home-mortgage refinancing, which was a little sluggish as of recently due to several years of big growth.
It is likely that the recent vote will have a long-term impact on the world economy. But in the short-term, U.S. real estate could see a flood of investors looking to the U.S. as a safe haven. "Demand for U.S. real estate could rise," says NAR Chief Economist Lawrence Yun.
Rates are already at historic lows. Britain’s exit from the European Union almost certainly guarantees they will remain low, at least for the short-term. If you were considering the purchase of real estate or scaling up or down into the home of your dreams, this may be the time to act. The cost of money may never be better for a potential buyer. From a financial point of view, there is not a better time to be looking for a home.