Napa Mortgage News

Brexit effect on our Mortgage rates

January 10th, 2017 4:44 PM by Dale DiGennaro

The UK votes to exit the European Union & rates drop!

Dear Gena,

The world was in shock yesterday as we awoke to the news that the UK had voted to break away from the European Nation. The stock market was proof the news was startling but the affect it had on our mortgage rates is the best we have seen since early 2015. Looking ahead, its a safe bet the the reaction to the British vote will continue to influence U.S. Mortgage rates so stay tuned...

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UK Votes to Exit

A shocking British vote to exit the European Union sent both stocks and mortgage rates much lower on Friday. The other economic news had little influence. As a result, mortgage rates ended the week lower, near the best levels since early 2015.

While the final polls ahead of the vote were close, the vast majority of investors expected the UK to vote to remain in the European Union. When the outcome indicated that the UK will exit the EU, the resulting uncertainty caused investors to swiftly shift to safer assets on Friday. Global stock markets sold off sharply and bond yields declined, including mortgage-backed securities (MBS). Since mortgage rates are set based on MBS prices, mortgage rates moved lower.

The British exit (Brexit) is expected to result in slower economic activity. The degree is difficult to predict. The uncertainty is heightened by the prospect of other countries in Europe proposing similar referendums. It is likely that European trade will be hindered by higher tariffs, companies will be more hesitant to hire new workers, and investors will be slower to commit capital to the region. However, this was viewed as positive for mortgage rates, since slower global economic growth reduces the outlook for future inflation.

In the U.S., low mortgage rates have contributed to healthy housing market activity. Sales of previously owned homes in May rose to the best level since 2007. This occurred despite a low level of homes available for sale. Strong demand and low supply pushed the housing market to two records in May. The median price of homes sold rose to the highest level on record, and the days on the market fell to a record low.

Looking ahead, the reaction to the British vote will continue to influence U.S. mortgage rates. In the U.S., the third estimate for first quarter GDP will be released on Tuesday. The report on pending home sales and the core PCE price index will come out on Wednesday. Core PCE is the favorite inflation indicator of the Fed. The ISM national manufacturing index will be released on Friday. Mortgage markets will close early on Friday in observance of July Fourth.

Our recent visit to our Nations Capitol! This time we saw it by train, auto, trolley, bus & boat!


	Gena & Jenae' at Washington Harbor. All aboard........

The National Cathedral. Beautiful on the inside too!

My daughter in front of the Orlando tribute at the National Calthedral

The Lincoln Memorial from our boat.

My sister Penny & Jenae' at the top of the historic Washington Hotel. Great view of the snipers on the roof of the White House from here!

Thank you for always trusting in us to do the best for you and your family and please feel free to call me anytime with your questions. I will be happy to share with you whatever information you may need!