Mortgage Rates Are Falling: Thank You, Brexit?

Prospective homeowners may be able to save a bit on a mortgage, courtesy of Brexit.

According to online loan marketplace Lending Tree, mortgage rates offered by lenders in its network have fallen 14 basis points since the United Kingdom voted on June 23 to leave the European Union.

Since January 2016, average offered interest rates have fallen from 4.28% to an average of 3.73% after the Brexit vote, Lending Tree said. On the day of the vote, the average offered interest rates for a 30-year fixed-rate mortgage were 3.84%.

The marketplace’s chart below shows the movement for rates (APRs) offered to borrowers from lenders on its network along with the Brexit inflection point:

Why Are Rates Falling?

Rates are going down because they’re tied to U.S. Treasury Bonds — and specifically the yield of those bonds, Heather McRae, a senior loan officer for Chicago Financial Services, said.

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“People buy U.S. bonds in times of global uncertainty because the U.S. government is (arguably) deemed reliable to pay back it’s debt,” she wrote in an email. “U.S. Treasury bonds are considered to be one of the safest investments out there. When a lot of people start buying bonds the price goes up, due to high demand, and the corresponding interest rate paid to the purchaser of the bond falls, which is called the yield.”

Lending Tree said it has seen a substantial increase in refinancing and purchasing requests for mortgages since the Brexit news.

“For people who have been hesitant to purchase a home or to even refinance an existing mortgage with an interest rate in the mid to high four percent range, the opportunity to save is there, although no one can say how long the opportunity will last,” Doug Lebda, founder and CEO of LendingTree, said in a press release.

Time to Buy?

The downtick certainly represents an opportunity for borrowers, but, as we’ve reported in the past, you may not want to rush into buying a home simply because mortgage rates are low.

“Yes, I think it’s a good time to buy a home,” McRae said. “However, I do believe it’s an individual choice and people need to do it at a time that is best for them not necessarily because they are trying to ‘play the market.'”

Generally speaking, before shopping for a home loan, you want to make sure you can meet down payment requirements, handle monthly mortgage expenses and safely cover other ancillary costs, like real estate agent fees, property taxes, home insurance and repairs, to name a few.

You also want to be sure your credit is in good shape. Scores of 740-plus generally net the best rates on a mortgage, so, if you’re below that line, you may want to work on boosting your credit score before you seriously look to buy a home. You can see where your credit currently stands by viewing two of your credit scores, updated every 14 days, for free on Credit.com. If your credit is looking a little lackluster, you may be able to improve your score by disputing errors on your credit report, paying down high credit card balances and limiting new credit inquiries while you wait for those numbers to rise.

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