Brexit Effect on Interest Rates
The United Kingdom citizens voted to withdraw from the European Union (Brexit) just just over a month ago. There was a lot of speculation on how that decision would impact U.S. residential mortgage rates. Today, I want to examine the Brexit impact after 30 days.
Most thought the Brexit decision would drive mortgage rates lower and keep them lower for some time. CoreLogic reported:
“First-time buyers can count on continued low mortgage rates to help with affordability issues. Similarly, re-setting adjustable rate loans will have less of a rate shock, and in some cases may even go down.”
What have interest rates really done?
Initially, rates fell. However, Freddie Mac states rates have stabilized and have actually increased marginally during the past 2 weeks. Per Freddie Mac Chief Economist Sean Beckett:
“Post-Brexit volatility tapered off over the last two weeks, allowing interest rates to bounce back a bit from their near-record 30-year mortgage rate lows.”
Capital Economics Property Economist Matthew Pointon predicts rates will continue to increase:
“Given we expect Brexit will have a minimal impact on the U.S. economy, we see no reason to change our forecast for mortgage rates to reach 3.85% by the end of this year, and 5.0% by the middle of 2018.”
Real Estate Bottom Line
It appears the Brexit impact on the U.S. housing market was brief and not as impactful as some thought it might be.