Why Brexit could mean it's time for you to buy an apartment or refinance your mortgage
After Britain voted to leave the European Union on Thursday, there was an immediate reaction in financial markets across the globe. Markets in the U.K. took a nose dive before the tally was even finalized, reports the New York Times, with economists warning of the potential of significant damage to the British economy. Peter Wetherell, chief executive of London-based brokerage Wetherell, said in a statement that “we are seeing massive shock and turmoil across all markets… financial markets will have to adjust to a ‘new normal'."
Meanwhile, American financial analysts are trying to forecast how the shock waves may land stateside. Bankrate, for instance, predicts in its investing blog that one area in which we’ll see a significant response is mortgage interest rates. Given that the values of the British pound and the Euro have already decreased against the U.S. dollar, mortgage rates are expected to decline as well.
Victor Calanog, chief economist and senior vice president of REIS, a source for real estate market intelligence, says the impact of Brexit on mortgage rates here in the United States is already evident. “Expect flat to downward trends in mortgage rates as any increase in the Federal Reserve’s overnight borrowing rate comes to a stop, given global uncertainty,” Calanog says. “Without pressure from policy on the one side, and with a large likelihood of homeowners pausing before making large real estate decisions in the next six months, expect mortgage rates to halt any upward trend.”
And as the Washington Post notes, 30-year fixed rate mortgages were already at 3.7 percent, the lowest they’ve been in three years; with rates anticipated to plummet even further, now is the time, many analysts say, for borrowers to refinance.
Nathan Burke, a vice president at National Cooperative Bank (fyi, a Brick sponsor), said that by Friday morning he had seen the 30-year fixed rate drop an eighth of a percentage point in response to the Brexit announcement. “If you recently purchased a home, now is the time to refinance,” Burke says. “And if you locked in last week, rates are definitely lower now.”
It seems that plenty of homeowners are tuned in to the opportunity: Rolan Shnayder, a partner with Citizens Bank, said on Friday morning that he and his colleagues had been in the office since seven a.m. handling borrowers’ requests for refinancing. “This is good news for anyone looking to buy or refinance right now,” Shnayder acknowledges, but he adds that it’s important to act very quickly: “When there’s a sharp drop-off, often it bounces back fast, so if you don’t catch it on the day it’s happening, then you miss out.”
Analysts are hesitant to weigh in on the long-term implications just yet, though. Ahead of the vote, an article in Forbes cautions that while Brexit could be immediately positive for borrowers, it could also trigger foreign demand for U.S. real estate, and thus higher prices—not the best news for prospective American buyers. On the local level, The Real Deal reports that while New Yorkers can look forward to low-interest financing, another likely outcome is that NYC will become even more of a destination for foreign investors than it already is. If the pound remains weak, the U.K.'s luxury property market will take a hit, and international buyers will shift their focus here.
But if you’re already a homeowner, consider refinancing now. “A sharp drop in mortgage interest rates now doesn’t mean it will translate to rates coming down across the board, because banks will lower rates slowly,” Shnayder says. And Burke concurs: “We’re seeing a quick reaction to the vote, but I think things will settle back down.”
Ready to jump on what looks like a golden—and possibly brief—window of opportunity? Sites like Bankrate offer tools that let you compare mortgage rates; then, reach out to your lender about locking in. And check out Brick’s resources on the ins and outs of mortgages, from loan shopping to applications to financing renovations, for more information.
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