Brexit drives down rates


Brexit drives down mortgage rates.

Mortgage rates at 3.41%, thanks to Brexit.

DU Professors says Brexit impact on rates is here to stay.


Thanks to Brexit, mortgage rates are approaching historic lows. Source: Freddie Mac.

London is 4,683 miles from Denver.

But if you are a homeowner or a home owner, you can’t be blamed if you have an urge to sing, “God Save the Queen.”

A silver lining to Brexit, the decision last month by Great Britain voters to leave the European Union, is that it drove already low mortgage lower.

In fact, last Thursday, the average rate for a 30-year fixed-mortgage fell to 3.41 percent, according to Freddie Mac.

That is 15.6 percent lower than they were a year earlier. Rates also are approaching their all-time low of 3.21 percent, set in November 2012, according to Freddie Mac.

And on Friday, the yield on the benchmark 10-year U.S. Treasury note fell to 1,366 percent, the lowest return on record. Bond yields love inversely to prices. That means the lower the yield, the more expensive the bond.

The record low bond yields could explain why on Friday that Zillow reported that mortgage rates were even lower than what Freddie Mac reported the day before.

Zillow, which claims its tracking of rates is more accurate an up to date than rates posted by  Freddie Mac, put the average rate at 3.27 percent.

It said Brexit has led to a 132 percent spike in refinancing requests.

Requests for mortgages to buy homes also rose, but not as dramatically.

Still, requests for new mortgage were up 25 percent, according to Zillow.

Dave Cook, a mortgage originator at Cherry Creek Mortgage, probably wouldn’t quarrel with Zillow’s numbers.

“It has been absolutely nutty,” Cook said. “I’ve been in the mortgage lending business for 16 years, and I have never seen anything like this.”

Cook is working 16-hour days and still can’t keep up with all of the people wishing to refinance their loans.

On top of that, he is seeing a surge in people who had just about given up on buying a home, but now want to re-enter to lock in these rates.

“I’ve got clients who have been bid on 20 homes and have lost each time, so they are ready to sign a new lease,” at their apartments.

“They were going to wait until next spring, but some of them are thinking of re-entering the market and take advantage of these wonderful rates,” Cook said.

However, if more people bid for homes that will continue to drive up homes already at record prices, he noted.

The average sold price of a single-family home in June was a record $440,879.

Refinancing: Painless way to save money

If a buyer put down 20 percent and got a loan for $352,703, the monthly principal and interest payment would be $1,566.

A year ago, when rates were just over 4 percent, the principal and interest payment would have been $1,692.

The $126 a month savings equates to $1,512 a year and $45,360 over the life of the loan.

Cook, however, noted that he can save many consumers even more.

He noted that a lot of his clients put down 5 percent or 10 percent, not 20 percent.

But when he refinances  loans, because of the rapid appreciation of Denver area homes, they no longer have to pay private mortgage insurance.

“The PMI payment is often $125 per month,” Cook said.

“Without any PMI and the lower rate, I’m saving a lot of people a couple of hundred dollars a month,” he said.

That is like getting a tax-free pay raise.

“Exactly,” Cook said. “And with people’s wages being stagnant, this is the perfect way to give yourself a boost in income.”

Phones also have been ringing off the hook at Denver-based MegaStar Financial Co.., since Brexit.

“Applications are up 18 percent since Brexit,” said Anita Padilla-Fitzgerald, founder, president and CEO of MegaStar.

Nationally, loan activity is up about 14 percent, since Brexit, she said.

“We might be higher as a reflection of the strong Colorado market,” Padilla-Fitzgerald said.

Before Brexit, 70 percent of its applications were for purchases and 30 percent for refinances.

Post-Brexit, it is 50-50, she said.

She said she is somewhat surprised that the markets, and consumers, acted so quickly.

“I think people watch the news and get curious,” about lower rates, although they may not understand the exact relationship between falling rates and Brexit, she said.

“We have not done any marketing to tell people about lower rates,” Padilla-Fitzgerald said. “Customers have just found us.”

The last time rates were this low or lower, it was fleeting.


Dave Cook of Cherry Creek Mortgage is working 16-hour days and still can’t keep up with the flood of refi requests in the wake of Brexit.

But Ron Throupe, an associate professor at the Franklin L. Burns School of Real Estate and Construction Management at the University of Denver, said he thinks these low rates are here to stay.

“It is almost like you need to disconnect the U.S. real estate market from Brexit,” Throupe said.

“After Brexit, and all of its uncertainty, capital fled to safety and there is no safer place than U.S. Treasuries,” he noted.

And Treasuries are tied to mortgage rates.

“Thanks to Brexit, there is not going to be a quick bounce back of rates this time,” Throupe said

“With all of the turmoil from Brexit, and the potential for the British currency to go even lower, I think mortgage rates will stay down.”

Unlike other times when rates plunged, consumers probably have a little more time to lock in these near record low rates, he said.

Apartment rents at record levels

Also, preliminary data indicates that Denver-area apartment rental rates spiked to record levels in the second quarter.

“It’s kind of shocking,” Throupe said. “The raw data is indicating that rental rates might have shown their biggest percentage jump ever.”

Jim Nussbaum, a veteran real estate broker with Kentwood Real Estate, said the near record low rates are certainly welcomed by buyers.

“It’s practically free money,” especially after taxes, Nussbaum noted.

However, when you factor in all of the costs, for many people, it is still cheaper to rent than to own, Throupe said.

On the other hand, as millennials enter their early 30s and want to start having kids, they want to move into a home and out of their apartments, anyway.

Super-low rates could give then an additional push to buy a home, he noted.

No housing bubble

Cook said a lot of people ask him if the Denver housing market is heading for another bubble.

Even if Brexit, by creating more demand for houses, drives up housing prices even more, he doesn’t think a bubble is likely.

“Look, we survived the Great Recession, the biggest housing bust since the Great Depression, without the kind of damage to housing prices that most other markets across the country experienced,” Cook said.

“If we can survive the Great Recession, we can survive this,” he said.

Not that it isn’t frustrating.

“I have clients who have seen lower-priced homes go for $50,000 above the asking price. That makes it very tough for first-time home buyers,” Cook said.

And thanks to Brexit, it will be ever tougher.

Brexit has “created savings opportunities for U.S. homeowners and those who want to buy,” according to Erin Lantz, vice president of mortgages for Zillow Group. “The drop in rates following the vote sparked an influx of refinance activity, and may also be encouraging home shoppers to move quickly and lock in a rate,” Lantz said.

“That said, while mortgage rates are a key factor when buying a home, it’s important to remember that affordability is rarely determined solely on the rate you can get.

“The harsh reality is that if you couldn’t afford a house a few weeks ago, you likely still can’t.”

 Have a story idea or real estate tip? Contact John Rebchook at is sponsored by 8z Real Estate. To read more articles by John Rebchook, subscribe to the Colorado Real Estate Journal.


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John Rebchook

John Rebchook has more than 30 years of experience in writing and communications. As the Real Estate Editor for the Rocky Mountain News, he wrote about residential and commercial real estate for 26 years. He has won numerous awards for business stories and columns that he wrote, both as an individual and part of teams. In addition to real estate, he also covered economic development, banking and financing, the airlines, and cable TV for the Rocky. In addition, he was one of the original freelance writers for, covering commercial real estate for the Internet publication.

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