Is the best day for mortgage rates yet to come?
Friday, June 24th, saw mortgage rates drop a full eighth of a point. And while this might not sound like a lot, it marks only the ninth time in a decade when rates have moved this much in a single day, with the most recent occurrence in October 2014. According to Matthew Graham, reporter for Mortgage News Daily, “it’s the single best day for mortgage rates in more than a year, not to mention the fact that outright levels are getting very close to all-time lows.” Of course all this follows the surprise victory of the referendum for the U.K. to leave the European Union—otherwise dubbed, “Brexit”.
What is Brexit?
Brexit is the exit of the U.K. from the 28-nation European Union (EU) and Friday was Day 1 of this first of its kind financial event; the great “unraveling” of the EU. The financial markets were hit hard with the British pound plummeting as investors pulled their money out of the U.K. and else where, and moved it into the U.S. markets. One of the biggest effects on the U.S. is the impact on our housing market.
How Does Brexit Effect Rates?
While the headlines report on the volatility of the financial markets world wide, remember that the U.S. economy remains fundamentally sound. This global unease, as reported in Forbes, has a silver lining for U.S. homebuyers looking to purchase and home owners looking to refinance —cheap loans.
What’s the Long Term Impact on Rates?
As reported by the Washington Post, rates could sink to record lows in the coming weeks according to Greg McBride, chief financial analyst at Bankrate. This prediction is repeated by Lawrence Yun, chief economist for the National Association of Realtors and Michael Fratantoni, chief economist of the Mortgage Bankers Association.
Joe Bilko, Vice President of Capital Markets for ditech agrees, “Following the Brexit outcome of the UK referendum, rates reached three year lows. We would expect rates to remain lower for longer as the Federal Reserve weighs changing global political and growth outlooks when making future rate decisions.”
It’s worth noting, however, that McBride’s long-term outlook does not change with the Brexit vote. He still estimates a rebound from these ultra-low rates by the end of this year.
So what should you do?
You might consider vacationing in Britain where the exchange rate with the U.S. dollar is the lowest it’s been since 1985. Of course, if you’re a home owner with a mortgage, you should consider refinancing. Lock if you like what you see. If you don’t have a mortgage, why not take advantage of these low rates to purchase your first home, your retirement home, your second home, your vacation home, or that rental property you’ve been considering. It’s easy to get started. Call us and talk to one of our home loan specialists today, 1-800-700-9212. At ditech, we’ve got the loans to take you home.