“The sudden stop in employment growth rules out any chance of a rate hike from the Fed at next week’s FOMC meeting, particularly now that the UK vote on whether to leave the European Union appears to be going down to the wire,” said Capital Economics Chief Economist Paul Ashworth. (source: Housingwire.com)
Britain’s exit from the EU increases the value of the dollar, which will push U.S. mortgage rates still lower. “This would create another mini refinance mortgage boom at financial institutions as homeowners rush to lock in near-historic low interest rates,” says Steve Rick, chief economist for CUNA Mutual Group. (source: Bankrate.com)
Fed Not Expected To Raise Rates
As Paul Ashworth indicated in his quote in HousingWire, The Federal Open Market Committee (who determines monetary policy of the Federal Reserve) is not likely to raise interest rates in their next meeting in July.
Futures dropped in the wake of the UK’s vote to leave the EU today, June 24th. This lack of confidence puts more pressure on the FOMC to, once again, postpone a rate hike.
US Dollar Strengthens as Pound is Pummeled
The pound fell to near 1985 levels, making it the lowest value in three decades. According to the Federal Reserve of St. Louis, 1GBP is now down to 1.37USD. (source: WashingtonPost)
When our currency is worth more, it has more purchasing power, which is cause for suspecting that this could make the cost of housing cheaper still.
Is a refinance boom coming? That remains to be seen, but with the relatively high supply in the housing market coupled with a stronger dollar, we may begin to see the supply begin to normalize as homeowners cash out on their accumulated equity.
The Takeaway
No matter your opinion of the EU Referendum result, mortgages are still, historically speaking, ridiculously cheap.
Mortgage prices tend to follow Treasury yields, which have been trending down all year, too. Last week, the interest on 10-year Treasuries dropped to its lowest in four years on worries that Britain would vote to leave the European Union. When the political and economic outlook is uncertain, the world’s money tends to flow into safe investments like U.S. bonds, including mortgages. – Loraine Woellert, Senior managing editor for Redfin research (source: Forbes.com)
Notes:
- FOMC(Federal Open Market Committee): http://www.federalreserve.gov/monetarypolicy/fomc.htm