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Why Brexit is a Gift with a Bow on Top to Homebuyers

Brexit is a gift to homebuyersWith the departure of Great Britain from the E.U. the United States has seen mortgage rates drop to historic lows. Because of the drop, the discussion has intensified for people to lock in to new rates before they start to climb back up by refinancing or purchasing a new home. Before we start diving into whether or not you should lock in this rate, why did Brexit affect the U.S. mortgage rates?

Real Estate conceptThe United States is part of a Global Economy. This means that other countries’ economies and decisions can directly affect us. With Great Britain leaving the E.U. many investors quickly grew uncertain as they didn’t know what to expect in the coming weeks & months. Because of this, many of them took their money from the stock market and overseas investments and transferred them to safer investment opportunity like government bonds or mortgage-backed securities which effectively drove mortgage rates down.

This is a classic example of how mortgage interest rates are impacted by various geopolitical events more than the Federal Reserve adjusting short term rates.  We explained this in a in a recent blog 4 Biggest Mortgage Rate Misconceptions.

Mortgage Rate Impact

While mortgage rates are close to an all-time low, no one really knows how long it will last. In fact, rates did rise a bit last Thursday and Friday. If you plan to buy by the end of the year it would be smart to do it in the next month or two while the rates are lower and the same goes for refinancing your current mortgage.

Interest Rates Brexit

Example of Mortgage Payment Change

To put this into perspective we put together an example of how people can save money with this new rate.

30 Year Fixed Rate Mortgage Rates Today Vs. Earlier in the Year*

Jan. 2016 Mortgage Rate = 3.87%

Today’s Mortgage Rate = 3.375%

Loan details With January Rate

Loan purpose:     Refinance

Loan product:      30 year fixed

Loan amount:      $320,000

APR:        3.87%

Monthly Payment (principal & interest) = $1,971

Loan details With Today’s Rate

Loan purpose:  Refinance

Loan product:  30 year fixed

Loan amount:  $320,000

APR:   3.375%

Monthly Payment (principal & interest) = $1,881

Monthly Savings with current rate = $90

Savings over 10 years = $10,800

And remember the bigger the loan size the more you save!  

*Calculations are based on credit score and debt income ratio, contact mortgage lender for specific qualifications

The graph below shows the change in mortgage rates from 2012 to now, if you purchased your home in 2013, 2014, or even 2015 you should consider refinancing due to the fact that the rates were much higher then and you could lower your monthly payments.

average mortgage rates12-16

This month’s new rates give people who are on the fence of buying a house, a reason to move forward. Saving over $10,000 over a 10-year period is a substantial amount of money that adds up! It is also important to understand that mortgage rates could begin to climb and pass January’s (already low rate) of 3.87% over the next year.

For more information about the current mortgage rates and how to take advantage of them, please give us a call at 855-510-7653 or fill out the contact form on this page.


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