Among the largest and most immediate effects from the vote by Britain this past week to sever its economic and political ties with the European Union are how it will alter mortgage interest rates and U.S. real estate prices. According to Redfin, here’s what you need to know about buying, selling and borrowing with the recent advent of the Brexit vote:
Will this hurt home prices?
It depends. Nationally, price growth might slow in the near term. Buyers with money in the stock market aren’t as rich as they were yesterday and they’re spooked. But mortgages are about to become less expensive, which will give them more incentive. Luxury sellers, in particular, could suffer. Foreign buyers consider U.S. real estate a safe investment and have been parking cash in Miami, New York and other cities. Some of them probably are shopping for high-end condos right now, but with stock markets losing value, there’s less wealth to go around.
Loans are about to get cheaper
Typically, mortgage rates fall when Treasury rates fall, and Treasuries decreased as money exited the U.K. and elsewhere into the safer U.S. markets. Mortgage lenders are braced for a rush of refinance applications. According to the Mortgage Bankers Association, the impact on the mortgage market will keep rates lower for longer.
Can I still get a mortgage?
Probably, but if you were planning to cash out stock holdings or borrow from your 401(k) to do it, think twice. You might have less wealth than you thought. As rates fall, do the math and consult your lender or financial adviser. It might be smart to put less money down, preserve your cash or even take out a bigger loan. The good news: Brexit and its aftermath shouldn’t make it more difficult to obtain a mortgage.
Should I put off buying?
Most economists lowered U.S. growth forecasts after the Brexit vote, but job growth has been good and unemployment is low. Going forward, corporations might be even more cautious with hiring and investment than they have been.
Home buying is personal. If you have the desire, money and maturity to buy a house, don’t let Brexit stop you.
Should I put off selling?
Again, the fundamentals still apply. Homes are in high demand and there are fewer homes to go around. Brexit won’t change that. Home sales hit their fastest pace on record in May. It might slow the speed as buyers pause to take stock. For sellers, that might mean houses sit longer on the market, get fewer offers and take longer to close. Remember: Whatever the market conditions, pricing right always is the best strategy.
