How Brexit Can Help Real Estate Buyers and Homeowners

 

Britain’s decision to leave the European Union brings widespread implications throughout Europe and a few on the North American continent, as well: namely, lower interest rates. The British vote in favor of withdrawing was announced June 24, a Friday.  By Monday, the average 30-year mortgage rate in the United States was 3.46%, nearly matching the lowest rates from 2012.  This is good news for homebuyers in the U.S., where many analysts believe the market has been slowing down.  With reduced interest rates, qualified buyers can purchase homes that cost 8% more than the homes they could have qualified for at the beginning of the year.

Homeowners also can benefit by the drop in interest rates if they qualify for refinancing as many of them are currently paying interest rates of 4% and above.

The vote on whether to stay in the EU or move out of it was 52% in favor, 48% opposed.  Analysts expect to see a period of economic uncertainty throughout Europe, with investors and companies slowing their activity while seeking safe investments.  This may cause the Federal Reserve to postpone any interest rate hikes until 2017, giving more incentive to buyers and those looking to refinance throughout the rest of this year.

Along with these domestic perks, interest rates below 4% could usher in another wave of foreign investors, pushing up the dollar and causing mortgage rates to drop further.  In that environment, we could see an overall increase in sales of both residential and commercial real estate in the U.S.

The vote of Britain to leave the European Union comes right at the start of the most active real estate season of the year.  We’ll watch the trends over the coming months to see how they’re affecting our market here in Silicon Valley.