Britain voted to leave the European Union on June 23, which came as a shock to the world.
After a 43 year involvement, Britain said goodbye to the European Union, sending shockwaves throughout the global economy. Stock prices immediately dropped in the wake of the vote, and mortgage interest rates are quickly approaching all-time record lows set in 2012. “Buying just got riskier. Selling just got riskier. Lending just got riskier, all because the market is more turbulent and less predictable,” said Redfin Chief Economist Nela Richardson. “It takes a certain amount of confidence to buy a huge asset like a house, and markets just lost their confidence.”
This could be the reason that the Federal Reserve voted in June to keep interest rates low, only in the 3s for a 30 year fixed rate. The unprecedented move by Britain is leaving investors around the world unsure about their next move.
Many are looking for alternative, safer investments, such as mortgage- backed securities, according to The Mortgage Reports. Experts are expecting record-low rates in the coming weeks but are unsure of how long it will last as the wake from Brexit expands through the world. Some are predicting the low rates will be short lived, while others believe they are here to stay for an extended period. “If you’re a borrower, don’t wait to lock your rate, as this opportunity may not last long,” explains Greg McBride, Chief Financial Analyst, Bankrate.
However, Doug Duncan, Chief Economist for Fannie Mae, maintains that “the fact that the Federal Reserve has referenced the potential exit of the U.K. from the EU as a risk factor affecting the decision on the direction of U.S. monetary policy means the Fed will very likely be on hold for some time as it observes the impact on US and global financial markets and economic activity. Low for long. This has been our view and continues to be our view. We expect mortgage rates will more likely fall than rise and will exhibit increased volatility.”
Time will tell what the market and interest rates will bear as a result of Brexit.