June 28, 2016
Mortgage loan rates dropped sharply after the news of the Brexit vote last week, and the fallout from that outcome is still affecting mortgage rates in the short term.
The popular vote in Britain to leave the EU is not legally binding-the government there must still make procedural moves to actually depart, and there’s some uncertainty over when or even IF that might happen. Talk of a second referendum is in the news, as well as talk about the “what if” notion of the government in Britain simply doing nothing, not departing the EU in spite of the vote. That, of course, is very much in the realm of speculation at the time of this writing.
What does all this mean at home? That investors are still reacting to the Brexit drama in ways that benefit mortgage loan rates in the short term. We saw rates move decisively lower on Friday, and on Monday rates dropped again, putting some 30-year fixed rate conventional lenders offering best execution rates at between 3.375% for more aggressive lenders and 3.5% for others.
Once again, conventional mortgage loan rates are dipping into FHA territory. They aren’t there yet, but with the FHA having left behind its long reported comfort zone range between 3.25% and 3.5% in favor of the bottom of that range, is it possible we could see FHA best execution rates dip even closer to the very bottom of the three percent zone?
That is speculation, and there’s no telling when the market might “bounce” or move sharply higher as a kind of correction to the current downward trend. It’s not safe to assume that these rock-bottom rates, described by some market watchers as “best in three years” or close to it, are here to stay.
Much depends on what happens with Brexit over the short term, or more specifically, how investors react. If that reaction continues to favor mortgage loan rates, we might see an extended run of the current numbers or close to them. But if and when the pendulum begins to swing in the opposite direction, there’s no telling how far or how fast rates might go higher.
Some market watchers don’t feel that the downward trend is over just yet. There’s talk that some gains might not be passed along until Tuesday, and there are those who look to the Brexit drama with the idea that it could affect rates for months to come. But it’s important to remember that other economic developments and breaking news can also affect mortgage loan rates-Brexit isn’t the only thing that has the power to affect mortgage loan interest rates.
So it’s crucial as always to assess your risk tolerance and choose wisely. Floating may be less risky in the short term, but holding off on a mortgage loan interest rate lock in hopes that rates go lower is never completely risk-free. Deciding in advance what you will do if and when rates begin to rise again is the best preparation you can make when choosing your lock/float strategy.
As always, the rates we report on here are listed as “best execution” rates, which assume a highly qualified applicant with outstanding FICO scores and other financials. Your experience may vary, these rates are not available to all borrowers or from all lenders.
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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