What does Brexit mean for the U.S. Mortgage Market?
The Brexit fallout is leading to greater demand other similar U.S. fixed income instruments, such as mortgages backed securities. As a result, mortgage rates have declined and should continue to drop to historic lows, according to Zillow.
Now would be a great time to start looking to buy a new home, due to the added home affordability from these lower expected monthly mortgage payments.
This sharp drop in mortgage rates can also be beneficial for homeowners’ looking to refinance their mortgage in order to drop their mortgage rate. According to Corelogic, as of February 2016, approximately 38% of active loans have a 30 Year Fixed mortgage rate greater than 4.50%. This significant drop in mortgage rates can result in substantial savings in a borrower’s monthly mortgage payments.
In addition, along with rising home values. these favorable mortgage rates can make it more affordable for borrowers who are looking to do a cash-out refinance, in which the client takes additional equity out of their home for such reasons as home improvement, college tuition or debt consolidation.
If you are currently in the process of obtaining a mortgage and you are happy with your quoted mortgage rate, it might make sense to lock it in and not risk losing out these historic low mortgage rates, which could be adversely affected by any future positive economic data. Overall, I believe that mortgage rates should remain in this range for the near future stemming from continued global economic uncertainty from the Brexit referendum.