Now that Great Britain’s exit from the European Union is a reality, global markets are in chaos — driving down interest rates in the process.
The results are in, and citizens of the United Kingdom have decided that they will abandon the EU by a vote of 52 percent to 48 percent.
One of the first casualties was Prime Minister David Cameron, who plans to step down after having supported the UK’s remaining in the EU.
In response, the Dow Jones Industrial Average was trading down more than 460 points near midday, while the UK’s FTSE 100 was down more than 2.7 percent and Japan’s Nikkei was down nearly 8 percent.
Curt Long, chief economist for the National Association of Federal Credit Unions, weighed in on the impact of the Brexit vote.
“For the U.S. economy, Brexit will at the very least lead to increased volatility in financial markets,” Long said in a written statement. “Fed action is likely on hold until the fourth quarter at the earliest.”
As investors sought the perceived safety of U.S. Treasury bonds, the yield on the 10-year Treasury note sank to 1.57 percent near midday after closing at 1.74 percent Thursday.
The 10-year yield is a benchmark for mortgage rates.
Thirty-year fixed rates averaged 3.56 percent in Freddie Mac’s
Primary Mortgage Market Survey for the week ended June 23.
A Mortgage Daily analysis of Treasury market activity suggests that 30-year fixed rates could be around 12 basis points lower in Freddie’s next report — potentially putting mortgage rates within striking range of the record-low
3.31 percent previously reported by Freddie for the week ended Nov. 21, 2012.
The activity has created ideal conditions for prospective mortgage borrowers, according to Bankrate.com Chief Financial Analyst Greg McBride.
“With the UK voting to leave the European Union, mortgage rates are tumbling and may approach record lows,” McBride said in a written statement to Mortgage Daily. “Borrowers shouldn’t wait too long to lock as this opportunity may be short-lived.”
