Mortgage interest rates were already nearing a three-year low before Britain shocked the world last week in voting to leave the European Union.
Economic shockwaves have sent rates even further south, as investors are turning to the comparative security of mortgage bonds. Some economists and industry insiders are using the word “historic” to describe how low mortgage rates might go before there’s a course correction.
“Mortgage rates have been falling for the past year and are now likely to fall even further,” said Peter G. Miller, author of the 2016 edition of The Common-Sense Mortgage. “It’s entirely possible that rates this year could drop below the historic lows seen in 2012, in some measure because the Brexit vote has created so much uncertainty in the marketplace.”
For qualified veterans and military members, it’s a rich-getting-richer type of trend. Brexit aside, VA home loans have had the lowest average interest rate on the market for the last 24 straight months, according to mortgage software firm Ellie Mae. Through the first five months of 2016, the average fixed rate for a 30-year VA purchase loan is 3.94 percent, compared to 4.23 percent for conventional.
Upheaval in the wake of the Brexit vote is only sending those VA loan rates lower.
The question is for how long. Many mortgage professionals are urging their borrowers to lock their interest rate as soon as possible. Still, others recommend would-be buyers continue to “float” to see if rates dip even more.
There’s really no easy way to gauge how much longer Brexit-induced volatility will continue to impact the mortgage market. The reverberations may also affect the Federal Reserve’s plans for future interest rate hikes in the U.S.
While the rate drops may wind up being unprecedented, in some respects the homebuying or refinance calculus remains the same regardless of that historic backdrop: It’s ultimately up to prospective borrowers to decide when they’re ready to lock their rate without regret.
“Mortgage rates are going to tumble,” Greg McBride, chief financial analyst for Bankrate, told CBS MoneyWatch. “They may set new record lows, but borrowers shouldn’t wait too long to lock in a rate because the opportunity may be short-lived if the market stages a rebound.”
Disclosure: Chris Birk is director of communications for the VA Mortgage Center, which specializes in VA loans for veterans and active duty service members. — also may need to make Impact in some cases
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