This is huge news and is a trending topic in a big way and this can have a big trickle down effect. Here are some things that could get effected
*Your mortgage
Mortgage rates are reaching their lowest
levels in three years in recent weeks as the Federal Reserve has begun
to fear that Brexit might become a reality. The latest data shows the average interest rate on a 30-year fixed
conventional loan at 3.54 percent approximately, compared with more than 4 percent a
year ago.
This isn't what most economists expected to happen this year. In December, the Fed
raised its interest rate for the first time since the recession and
said it planned to make four more rate hikes this year in 2016. The anticipation
of higher rates from the Fed pushed up 10-year Treasury yields, and
mortgage rates followed.
The Fed has not hiked rates again, yet.
It was forced to reevaluate its plans amid this weakness in the global
economy. Last week, Fed officials voted to remain on hold, and they
cited the risks surrounding Brexit as an important factor.
Consequently, yields on 10-year Treasury notes fell to levels not seen
since 2012.
Brexit has spawned a recent bout of volatility in
global markets. This has anxious investors scurrying for
safety -- and few assets are safer than U.S. Treasuries. High demand for
government debt pulls down interest rates.
This all translates
into ultra-low mortgage rates for American households. And with Britain
voting for Brexit, they could go even lower.
*A Volatile market slows down the engine of U.S. growth
American consumers make up the majority of U.S. economic activity. If
they don't spend, the economy doesn't grow. How much money is spent
often depends on how they feel good about where the country is heading.
Americans don't go out and buy homes and cars if things aren't looking good and a stock
market downturn can really whittle down confidence.
Brexit is
already causing severe volatility in global markets. If that
volatility continues for weeks and months, it could cause American
business owners and consumers to reconsider their spending plans.
A cutback by consumers would be particularly bad news at the moment.
*Brexit forces the Fed to rewrite its playbook
As mentioned above, in December, the Federal Reserve signaled that it would raise rates
four times this year -- this would be a strong sign that the U.S. economy has
recovered from the recession. Higher interest rates benefit
savers, who can make more money on deposits.
By June, some Fed committee members were calling for just one rate hike in the wake of weak growth and slowing job gains.
If volatility in the markets from Brexit continues, and if U.S.
consumers ease back on spending, and employers slow down hiring even more,
the Fed could be looking at zero rate hikes in 2016. In fact, markets
are already starting to increase their expectations for a rate cut this year.
This isn't not how the Fed planned for the year to unfold. U.S.
central bank officials had started the year with high expectations after
raising rates in December for the first time in nearly a decade.
The Fed is now coming back down to
earth. Other central banks around the world have lowered interest rates into
negative territory and the conversation has shifted to whether the Fed
should consider that move too.
Long story short, there is quite a bit going on and quite a bit on the horizon after that decision was made today. I won't bore you with this any longer today but keep an eye for more news to come.
For now rates are low, crazy low... If you are thinking about purchasing a property or are thinking about refinancing, contact me to see what we can do to help.
*source - Washington Post, CNN money
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