Mortgage Rates Fall Sharply After Brexit

The decision by the United Kingdom to leave the European Union (referred to as "Brexit") rocked the world just last week, leaving a great deal of uncertainty in financial markets. However, many experts predicted that this news could actually benefit the U.S. housing market in the short and medium term. With the immediate effects of Brexit in the books, the move has had the expected results of rapidly decreasing interest rates, making homes more affordable for millions of Americans!

As we detailed in our previous blog post, Brexit was predicted to boost U.S. real estate in two ways: by making the U.S. more attractive to commercial buyers looking for stability and by lowering interest rates on mortgages. One week after the historic vote, one of these predictions has already come true, as mortgage rates fell around 30 basis points before stabilizing on Tuesday.

Prior to the vote last week, the average interest rate on a 30-year fixed-rate mortgage was about 3.75%, already the lowest level since late May of 2013. On Monday following the vote, the average had fallen nearly 30 basis points to 3.46%, which rivals the lowest rates seen in late 2012-early 2013. At this time last year, rates were just over 4%, making home financing much less affordable for many people.

Jonathan Smoke, realtor.com's chief economist, recently wrote, "Lower rates produce lower monthly payments and greater buying power—those who are well qualified can afford a home that’s 8 percent more expensive than at the beginning of the year. That’s more than enough to offset the rise in prices during that time."

Source: Thanks, Brexit! Well-Qualified U.S. Buyers Reap a Windfall