Unless you’ve been living under a rock as of late, you’ve probably at least heard some buzz about the British withdrawal from the European Union, or Brexit as it has been so cleverly referred to. The June 23rd referendum, which ended with just over half of the country voting to leave the union, has put the country, the continent, and even the whole world in a very uncertain place.
Economic uncertainty is one of everyone’s biggest fears with this historic decision. Since Britain was one of the major economic players in the European Union, its exit from the Union could potentially have some serious economic ramifications. This decision will not only destabilize the economy in that little corner of the globe, but also create a ripple effect of economic uncertainty around the world. With such a major upheaval, it’s fair to assume that the trials and tribulations of our neighbors across the pond will also have an effect on financial dealings here in the United States.
Nobody is still quite certain about what exactly happen with Brexit. It will probably take at least a few years for Britain to officially extract itself from the European Union. In the meantime, though, particularly in the coming weeks and months, the world can look forward to some…interesting economic changes.
Here in the United States, most eyes are on interest rates. How will Brexit effect us here in the States, and what will happen to our interest rates?
Just before the June 23rd Brexit referendum, the average 30-year fixed-rate interest rate in the United States had dropped to just 3.59%, which is quite a bit lower than the 4.01% average interest rate at the beginning of the year. However, post Brexit, interest rates have gone down even more, and were standing at 3.40% as of July 1st.
So, I guess that answers the question of how Brexit will effect most of us here in the States. For many, it will mean a chance to save on buying a home. And, in some cases, that could potentially be a huge savings!
Let’s look at a 30-year fixed rate on a $500,000 mortgage, just as an example. If you bought your home at the end of last year and were locked into an interest rate of 4.00%, over the course of the loan, you would end up paying around $360,000 in interest. However, let’s say that you waited until today to purchase a home and received an interest rate of 3.40%. You would end up paying around $300,000 in interest. Waiting just a little bit could have saved you over $60,000 in interest! And, if you wait just a little longer…chances are you could save even more!
Financial gurus are predicting that Brexit will drive interest rates even lower in the near future. For the American consumer, that means that the time to buy a house or refinance an existing mortgage is now! Or at least very soon.
There’s really no telling how long this rate drop will last or how low they’ll go. The average interest rate hit an all time low in November of 2012, when they dropped to a mere 3.31%. This time around, it’s plausible that they could plummet even lower. As for how long this will last, there’s really no telling. As a consumer, it would be wise to start keeping your eye on interest rates and possibly start shopping around with different lenders.
If you’re stuck with an interest rate that’s too high on your existing mortgage, now would be the right time to consider refinancing. If buying a home is in your plans for the near future, it’s time to pull everything together and get to house hunting!