Brexit Tests Investors’ Nerves, But Also Prompts New Refinancing Demand
In the immediate aftermath of the United Kingdom’s surprising vote to leave the European Union (EU), it looked to many financial market observers that the sky was starting to fall.
Britain’s exit (the Brexit) decision did in fact roil the U.S. financial markets for a few days, and it has added some uncertainty for investors. But by and large, the historic event is unlikely to alter the U.S. economic landscape — at least for the second half of this year — according to Fannie Mae’s Economic & Strategic Research (ESR) group.
“Financial volatility resulting from Brexit has created some uncertainty among investors,” says Fannie Mae Chief Economist Doug Duncan. The fallout includes a sharp drop in yields on government bonds, a flattening in Treasury yield curves, and depreciation of the Chinese Yuan against the dollar.
Effect on the Mortgage Industry
But the Brexit referendum, if anything, may lend the domestic mortgage market a few extra days of sunshine for the balance of the year. That’s because it has taken some of the wind out of Federal Reserve’s plans to gradually increase interest rates.