The outcome has been watched globally with many predicting that the decision to remain will have a hugely positive impact on the financial markets and the mortgage industry in particular. The UK Treasury, the International Monetary Fund and others all warned that a vote to leave would have damaged the UK economy as well as threatening global markets. And here in the U.S., the mortgage industry has seen ripples from the mere worry that the UK would exit the EU.
In recent weeks, mortgage rates tumbled to three-year lows as the Fed worried that the UK might vote to leave. As of Tuesday, housing giant Freddie Mac showed the average interest rate on a 30-year conventional mortgage at 3.54%. Meanwhile, the Mortgage Bankers Association saw purchase loan applications increase 17% from the first quarter, while refi apps rose 10%, according to a Washington Post report.
That’s because mortgage rates are tied to the yield on 10-year Treasury bonds, which in turn are tied to the Federal Reserve’s benchmark interest rate. The Fed had planned to raise interest rates this month, but backed off, citing Brexit risks as a factor, according to the Post.
“A UK vote to exit the European Union would have significant economic repercussions,” Fed chair Janet Yellen said Tuesday.
In short, a UK vote to exit the European Union could well lead to ultra-low mortgage rates – although the widespread economic chaos some predict might be a high price to pay.
The referendum vote came at the conclusion of what was a divisive campaign. On one side of the contest was British Prime Minister David Cameron ushering stark warnings about the financial and economic risks of a departure; while the ‘leave’ campaign was headed up by former London Mayor Boris Johnson who used immigration as a key ploy in whipping up support suggesting that an exit would allow Britain to regain control of its borders.
Now questions are swirling as to the future of the British Prime Minister – he had publicly vowed to stay on regardless of the result, but many have questioned whether his position will remain tenable after such a significant defeat.
The vote has widely been considered a shock result with Paddy Power, Ireland’s largest bookmaker having placed the odds on a ‘remain’ vote at a 1/12 chance – effectively a 92 per cent probability. This represented a swing from 77 per cent just one day earlier, making the result all the more surprising.
In a result that has sent shockwaves throughout the insurance industry worldwide, the UK has officially voted to leave the European Union.