If you’re looking for a mortgage you just got an extension on historically low rates.
British voters shocked the world when they juked political pollsters and oddsmakers, the latest trend predicting political outcomes in the United Kingdom, and elected to leave the European Union (EU). Americans went to sleep with overwhelming confidence that Britain would remain a part of the EU only to awake to international markets reeling from the unexpected vote to exit.
While newsmakers are running about like chicken little, you, as an average consumer, got a nice little gift. Your mortgage rates are likely to continue to hover around their historic lows of 3.7% or drift lower for a quick bit.
Driven by mortgage-backed securities, strong correlation to the 10-year US Treasury, and an eye to moves in the Federal funds rate, mortgage rates are getting downward signals from all of these indicators.
Mortgage-backed securities and 10-year Treasury notes are likely to experience a jump in price and resulting reduction in yield as investors look for a temporary safe haven. Mortgage and US debt, stable for over a decade, is the most likely place for investors to park their fear.
Meanwhile, Fed Chair Yellen and the Federal Reserve Board are certainly reconsidering any thoughts they had about hiking the Fed funds rate anytime soon. Whereas most Fed watchers were predicting another 0.25 increase in the benchmark interest rate in September or October, the consensus opinion is now that this move has likely been pushed into 2017.
All of that being said, I would expect the Brexit reaction to only be a temporary influencer in the mortgage market. Markets tend to significantly overreact and overshoot when the unexpected happens, but then quickly stabilize and resume their previous trajectory.
The more traditional drivers of mortgage rates and market are likely to resume their role and coax mortgage rates back up within the next several months. If you’re looking to buy or refinance your home, this might just be a perfect opportunity.