June 27, 2016
For five straight business days prior to the Brexit vote, mortgage loan rates moved higher. Investor reaction to the anticipation of the vote played an important part in this; uncertainty over the outcome of the vote and what the vote might do to markets added potential volatility to the daily ups and downs for mortgage loan rates in general.
Then the Brexit vote happened, the majority spoke, and investors reacted accordingly. The result? A major shift lower for mortgage rates on Friday, one not seen since well over a year ago. Rates moved lower in one day than they have in all that time, resulting in 30-year fixed rate mortgage best execution rates to fall down 3.5%.
FHA mortgage loan rates finally shifted out of their comfort zone during Brexit drama, closing Friday with a best execution 3.25%. That’s down from the previous FHA best execution range of rates between 3.25% and 3.5%.
Remember, “best execution rates refer to the rates offered applicants with extremely favorable financial qualifications. Your FICO scores and other financial qualifications will play a major role in your ability to access rates similar to the ones listed here. Your experience may vary; these rates are not available to all borrowers or from all lenders.
Some may be confused by these changes, until it’s explained that in many cases what is bad for the economy is good for mortgage loan rates. The Brexit vote-Britain’s voters choosing by a narrow majority to leave the European Union-cause a plunge in markets at home and abroad.
And mortgage rates, while not directly affected by such events, ARE affected by investor reaction to such events. In the markets that do affect mortgage loan rates, a shift towards “safe haven” investments benefits mortgage rates in the short term.
Those who pay attention to what the industry pros say about locking in a mortgage rate commitment with a lender (versus “floating”, holding off on making that commitment in hopes that rates will move lower) will notice that plenty of market watchers felt locking was the better move. Obviously those who were more interested in floating through the Brexit vote had a major payoff.
The lock/float advice in the wake of Brexit is mixed, but some believe that locking now is a safer move due to the uncertainty over how long current rates will last in the short term. Floating is never risk-free in the best of times, but if you are tempted to float, ask some advice of your lender to make the most informed choice possible.
There’s simply no telling where rates might go from here, and it would be wrong to assume a “bounce” or correction is NOT coming at some point. When the pendulum swings in one direction, eventually it must swing the other way. The question is, how long before that movement occurs?
Do you work in residential real estate? You should know about the free tool offered by FHA.com. It is designed especially for real estate websites; a widget that displays FHA loan limits for the counties serviced by those sites. It is simple to spend a few seconds customizing the state, counties, and widget size for the tool; you can copy the code and paste it into your website with ease. Get yours today:
http://www.fha.com/fha_loan_limits_widget
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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