Even before the Brexit vote sent shock waves across Europe and the rest of the world, U.S. mortgage rates were fairly close to their all-time lows.
Now, the prospect of more turbulence and a flight to safety among global investors to U.S. treasuries could fuel another dip into historic territory for the 30-year fixed mortgage. This would create new opportunities for first-time home buyers and others who have been waiting on the sidelines as home prices have risen and inventories tightened.
Brexit’s ripples should bolster the housing market overall. But it’s uncertain for how long rates will stay this low, spurring more demand for existing and new homes.
Before the Brexit effect, many economists were projecting average mortgage rates over 4 percent by year’s end. But the 30-year fixed rate stands at 3.56 percent this week. That’s just 25 basis points from the all-time low reached during the week of Nov. 21, 2012 when the long-term rate hit 3.31 percent.
“At this point, it is unclear whether this (Brexit aftermath) will just be a short term disruption, or whether it will have a longer-term impact,” Mortgage Bankers Association chief economist Michael Fratantoni told the Washington Post. “Our best guess at this point is that the impact on the mortgage market will be to keep mortgage rates lower for longer, likely leading to another pickup in refinance activity.”
A weak jobs report for May led Fed officials to vote this month to maintain its benchmark interest rate. They increased it by 0.25 percent in December, which was the first time since 2006. The uncertainly over Brexit and its repercussions are expected to keep the Fed from raising rates anytime soon.
Earlier in the week, the National Association of Realtors reported that sales of existing homes rose to their highest level in more than nine years, and prices climbed to a new peak in May.
The national median sale price for a previously owned home was $239,700, up 4.7 percent from a year earlier.