Brexit Sinks Mortgage Rates to Three-Year Low
Britain’s exit from the European Union, now being referred to as the “Brexit,” has had a huge impact on financial markets worldwide since the historical decision was announced on June 23. Only time will tell what the long-term consequences of Brexit will be and it has already caused some significant changes to the global economy. You may be wondering how some political decision in Europe could have an effect on the U.S. The truth is that today’s world is so interconnected that changes in the British economy will inevitably affect the U.S. economy. As of right now, the decision is reflecting favorably on the nation’s mortgage market. To understand why, let’s take a closer look at the situation.
Immediately after Brexit was announced, the U.S. stock market took a plunge, and interest rates on U.S. government debt (Treasury bonds) dropped from 1.75 percent to a low of 1.43 percent. The interest rates on Treasury bonds (considered the safest type of investment) serve as a benchmark for the overall market rate of the economy. Therefore, once treasury yields dropped, mortgage rates dropped as well. And as the stock market has stabilized in the days since Brexit began, interest rates have remained low and seem unlikely to rise anytime soon. Now, thanks to Brexit, it’s actually the best time in three years to get a mortgage. The average rate of a 30-year fixed mortgage fell to 3.48 percent, the lowest it’s been since 2013. This time last year, the rate was 4.08 percent. These lower mortgage rates will allow homebuyers who were on the sidelines to jump at this opportunity. For others, the new rates could make a more expensive home more affordable, and a potential hike in prices may benefit home sellers.
Economists are also predicting that Brexit could increase demand for American real estate, since it’s likely to be a more stable market than Europe. London has always been a major real estate market for global investors. However, with the uncertainty surrounding the economic landscape of the UK, many foreign investors will look to put their dollars into the U.S. instead. South Florida, a world-class region for international real estate transactions (due to its abundance of new construction in comparison to other metropolitan areas, the sunshine, lifestyle, and relatively low prices compared to other similar regions) could surely be a prime target. Hence, it is anticipated that South Florida in particular may become increasingly attractive to those looking to invest in real estate, which could mean a boom for the market.
If you’re thinking about buying or selling a South Florida home, there is no better time than the present. At Stein Posner, our South Florida real estate agents are experts in the area and will work tirelessly to find your dream home. Give us a call today for more information on how we can help you make the most of today’s low mortgage rates.