Home Buying

How ‘Brexit’ is actually benefitting U.S. homebuyers

At 3.61 percent, the rate on a 30-year, fixed-rate mortgage is just a hair's breadth above December 2012’s record low of 3.5 percent. AP/Steven Senne

By Scott Van Voorhis

July 5, 2016

2 minutes to read

For home buyers across Greater Boston, there’s a silver lining to the recent bout of Brexit-induced financial market turmoil.

The United Kingdom’s stunning vote to pull out of the European Union and the stock market gyrations that followed have pushed mortgage interest rates down once again to near record levels, notes Greg McBride, senior vice president and chief financial analyst for Bankrate.

At 3.61 percent, the rate on a 30-year, fixed-rate mortgage is just a hair’s breadth above December 2012’s record low of 3.5 percent.

While McBride does not see a new record low shaping up at this point – financial markets have rebounded handsomely in the last few days – neither does he see any big rate increases in the near-term.

Slowing economic growth and low inflation around the world, among other factors, will continue to keep a lid on rates, he noted.

“I wouldn’t count on them getting much lower, [but] they probably won’t move appreciably higher,” McBride said.

The downshift in rates comes after several months in which the opposite outcome was expected. The Federal Reserve had been hinting it would begin hiking the cost of borrowing as companies posted impressive hiring numbers and economic growth in the U.S. finally appeared to be picking up.

But that’s old news now, with no one expecting the Fed to be moving ahead anytime soon with rate increases in the gloomier, post-Brexit world economy.

So what’s the silver lining for home buyers? Lower rates will give Boston-area buyers additional financial firepower as they compete for homes in one of the country’s most expensive housing markets.

Recent declines that began even before the Brexit vote have effectively lowered rates by a quarter percentage point. That is about $25 to $30 off the average monthly mortgage rate, McBride said.

It’s not a huge difference, but it might be enough to help some buyers feel a little more comfortable buying a slightly more expensive home than they first planned on.

The drop will also help current homeowners looking to refinance their mortgages. For a refi to make sense, it needs to lower the interest rate on the mortgage by at least a half to three quarters of a percentage point, he noted.

“It gives home buyers a little added buying power,” McBride said.