Homeowners Will Benefit
Brexit happened. And one of the biggest, and most immediate, effects on everyday Americans is how it will change interest rates on home loans. Greg McBride, chief financial analyst at Bankrate, said rates could sink to record lows in the coming weeks. “If you’re a borrower, don’t wait to lock your rate,” he said, “as this opportunity may not last long.” They’ve already hit rock bottom this year. In the past month alone, 30-year fixed-rates on home loans have hovered around 3.7 percent, nearly a three-year low. Britain’s vote to leave the European Union is expected to drive rates even lower.
Rates have been about 17 percent lower than the median of this decade. However, McBride said his long-term outlook does not change with the Brexit vote. He still estimates a rebound from ultra-low rates by year’s end. Mortgage Bankers Association chief economist Michael Fratantoni forecast a rate of 4.8 percent by December 2017. That would be the highest rate since 2009, and a 30 percent boost from current levels. By the end of 2016, Fratantoni expects rates to reach 4 percent. He noted that he’s turned his estimates more conservative in recent months, but predicts an increase nevertheless. That could change with the Brexit referendum passing, however.
He noted that Treasury rates had already dropped about 20 basis points the morning after the vote. “At this point, it is unclear whether this will just be a short term disruption, or whether it will have a longer-term impact,” Fratantoni said. “Our best guess at this point is that the impact on the residential real estate sector will be to keep rates on home loans lower for longer, likely leading to another pickup in refinance activity.”
Source: The Washington Post