Brexit and Mortgage Rates:
The Brexit Vote, Great Britain’s exit from the European Union, is all the talk around the world.Over the weekend, I decided to research how Brexit may affect the real estate market. During my research, I found an article by Kathy Orton entitled “Mortgage rates tumble to near-record lows as reverberations from the Brexit vote continue.” Kathy Orton is a reporter and Web editor forthe Washington Post. It seems Brexit pushed mortgage rates even lower than the historic lows are now used to. I thought I would share my takeaways from Kathy’s article with you.
Rates are decreasing for Now:
Investors’ anxiety about the global economy are reflective of last week’s yields on long-term bonds plummeting to historic lows. The movement of the 10-year Treasury bond is a lead indicator of whether mortgage rates will increase or decrease. Last week, the yields on long-term bonds plummeted to historic lows. Mortgage rates seem to follow long-term bond yields. As result, mortgage rates are at historic lows.
According to Freddie Mac, the 30-year fixed rate average plunged to 3.41%. A year ago, it was at4.04%. The 5-year adjustable rate average dropped to 2.68%. A year ago, it was at 2.93%. In short, in a time of recent historic low rates, we are seeing interest rates decrease even more.
Mike Fratantoni, MBA’s chief economist stated that “[w]hen rates drop, homeowners know tocall their lender and see whether they could benefit from a refinance… Lenders are going to bebusy fielding those inbound calls. Mortgage rates have been low for years, but the impact ofBrexit has brought us close to record lows once again, with jumbo rates already at their lowest levels. In addition to the increase in refinance activity, lower rates also seem to be helping potential home buyers jump into the market. Even though financial market volatility may be causing some anxiety, the combination of low rates and a still strong job market in the U.S.outweighs those fears from home buyers.”
Applications spiked last week, according to the latest data from the Mortgage Bankers Association. The market composite index (loan application measurement) increased 14.2% from two weeks ago. Refinance applications increased 21%, while the purchase applications increased by 4%.
What Does this Mean to You?
There are a number of opportunities with interest rates decreasing while applications are increasing by 21%. This may be an opportunity to capture potential home buyers who are waiting to purchase a home. I listed a few suggestions to consider to capitalize on this decreasein interest rates.
1) Communicate with potential buyers who are “on the fence” and inform them of the rate drops.
2) Communicate with your lender OFTEN and EARLY. Remember, lenders will be swamped with purchase and refinance loan applications.
3) Be patient.