The United Kingdom’s stunning June 2016 vote to leave the European Union sent average mortgage rates in the U.S. tumbling 60 to 80 basis points (literally) overnight, as investors fled to the safety of the 10-year Treasury note that’s the benchmark for mortgage interest rates.
U.K. and EU officials wrapped up negotiations on the terms for post-Brexit relations on Nov. 25, but that process was thrown into turmoil this week when U.K. Prime Minister Theresa May canceled a key Parliamentary vote to ratify the treaty — prompting her own party to call for a vote of no confidence. May ultimately prevailed in the challenge to her leadership, but the future of the Brexit deal remains uncertain.
With the March 29, 2019 Brexit deadline looming, it’s unclear whether an agreement can be reached to avoid the more onerous conditions of EU treaties no longer applying to the U.K. and no framework to guide the Brexit transition.
Whatever the resolution to the Brexit ordeal, there will again be repercussions for the U.S. housing market. And with concerns already high in the mortgage and real estate industries about rising interest rates, inventory shortages and the threat of a housing bubble, the uncertainty overseas isn’t guaranteed to deliver another Brexit bump for mortgages and real estate.
Here’s a look at some potential scenarios for the mortgage and housing market depending on how Brexit plays out.