Good News For Homeowners: Thanks To Brexit, Mortgage Rates Hit 3-Year Low
On Thursday June 23rd, 2016, Britain voted to trek into the political unknown and leave the European Union. As is typical whenever something major happens on a global scale, all hell broke loose. England’s prime minister quit and stocks around the world dropped at a rapid rate.
And here in the US, us Realtors sat, watched and waited for the ripples to emerge in the real estate and mortgage industries.
You see, in real estate, money talks, and one of the biggest effects of Brexit and the plummet of the global stock markets is that mortgage rates would be soon to follow. And follow they did.
The money gods have spoken and according to Freddie Mac’s Chief Economist Sean Becketti, “this week’s survey rate is the lowest since May 2013 and only 17 basis points above the all-time low recorded in November 2012.”
So what does that mean for American Homeowners and Homeowner-hopefuls?
For the typical home seller, the following two categories comprise the majority of the buyers currently in the market:
- Serious, and in a hurry
- Serious, and not in a hurry
The serious buyer is pre-approved and working with an agent. If they are in a hurry, that means that they need to find a home quickly and are motivated to make purchase. If they are not in a hurry, this might be your first-time homebuyer looking to proceed with caution and wait for their dream home. They are able and willing to buy but maybe not ready.
This is also the buyer who wants and needs to buy, but may be concerned because of the appreciating home prices.
Let me explain- over the past year, we have seen that there are not enough homes on the market to support the high demand of these types of buyers. This low inventory of homes has resulted in a steady 5% increase year over year in home prices according to Mark Hamrick, senior economic analyst at Bankrate.
Although interest rates have been fairly low, for some serious buyers, this has caused an affordability issue when it comes homeownership resulting in many serious buyers who are just not in a hurry to buy.
With the new changes caused by Brexit, we may be seeing a shift in buyer motivation for this group.
Thanks to Brexit, Homebuyers Are Motivated By Historically Low Rates
With rates at historic lows, the lowest they’ve been in 3 years, buyers that may have been on the fence about making a purchase because of the higher prices, will likely now be more eager to lock in these rates. This is because despite the higher prices, taking advantage of a lower rate can mean a lower and more affordable monthly payment and saves money in the long run over the course of the loan itself.
There may also be an influx of new buyers to the market looking to take advantage of the drop, making it an excellent time to get your home on the market.
The other benefit to homeowners is that now could be a great time to refinance.