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The Brexit & U.S. Mortgage Rates

The 30-year mortgage rate in America was 3.75% prior to the British exit from the Eurozone. The rates dropped to 3.66% following the event - the lowest since May of 2013 - and saw a soaring in 30-year mortgage applications.

The reason for this is investors stopped betting on American, British, Japanese, and European bonds which flattened due to the June 22 Brexit vote and reacted by seeking out the security of the U.S. Treasury. 

Mortgage rates tend to follow suite proportionally with 10-year Treasury rates and that's exactly what happened: the Treasury rates dropped to a record 1.321% and the 30-year fixed mortgage to an average of 3.56%. Who knew something this good here would come of the British leaving the Eurozone? 

A Potential Rescue for American Homeowners

Using historical trends as our frame of reference, it looks like lower rates are more than likely to follow due to three driving factors of the U.S. Treasury. Mortgage rates are likely to undergo more drops as long as Treasury rates decrease which could kickstart a cycle of market revival and prosperity. The three main stages of this trend that need to remain in order for economic growth to occur are the following:

  1. More funds allocated towards the Treasury: If the trend continues with investors constantly seeking security with U.S. Treasury bonds, that guarantees lower and lower rates.
  2. Lower rates mean there will be more consumer activity and better mortgages for homeowners.
  3. More consumer activity improves the dollar's buying power.

Get It While You Can

Rates are low for now but no one knows anything for certain, which is why it is better to pick up a mortgage deal now while the rates are at a record bottom and you can refinance later should the rates plummet again. This is the best kind of environment for homeowners that we've seen in recent years.

The table below gives a few examples of 30-year fixed mortgages from reputable lenders with recent figures:

Lender  Recent Deals on Fixed Mortgages
Loan Type Loan Amount Rate APR Monthly Payment
 JP Morgan Chase 30-Year Fixed-Rate $215,000 3.250% 3.340% $935.69
 Bank of America 30-Year Fixed-Rate $200,000 3.500% 3.660% $898.00
 Quicken Loans 30-Year Fixed-Rate $200,000 3.375% 3.640% $884.20
 Wells Fargo 30-Year Fixed-Rate $200,000 3.250% 3.525% $899.00

If you have been thinking about taking out a mortgage but you're waiting for the right moment, now is the time. You can always roll with the punches and refinance if interest rates continue to drop come next season.

Act now and fill out our brief form for a 100% free and instant quote to solidify your home ownership dreams.

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