Mortgage rates inched higher after France’s presidential elections. The 30-year fixed-rate mortgage is quoted at 4.125 percent on top-tier scenarios while other lenders may offer rates at 4 percent, though with higher upfront costs.
What is going on?
If you’re one of the majority, you probably have no clue as to how events in Europe affect US mortgage rates. So let’s have a basic view of indeed how the whole rate-politics thing goes.
The European Union(EU), which consists of a conglomerate of European countries with a unified economy, holds a bigger economic range than the US. This network consists of investors, leaders, businesses, the public sectors, etc. which operates a whole system of finances. Now in this gargantuan of a collective as the EU, the biggest key players are Germany, the UK, and France.
If you’ve frequented the news sections in the past few months, you are probably aware of the UK’s ongoing process of breaking up with the Union. As they prepare their exit, there is talk that France might want to do the same. The loss of two of the biggest shareholder countries in the union would create a large impact not just in Europe’s eco-political zone, but globally.
This is how the election gets influential. Whoever is elected leader of France might determine the fate of the Union. This is now the case with Marine Le Pen, the presidential candidate who clearly opts to take France out of its EU membership.
Exit Risk
Investors see the potential exit of France to be a risky move for their economic interests. When there is a threat to their interests, investors are then motivated to sell stocks and buy bonds. Bond buying results to low interest rates.
So after the results negating the initial fears, investors then sold their bonds that resulted to a move higher in rates – though clearly not very significant, or at least at this point, when the odds have been lowered.
Should you lock or float? It’s clear how tied political events are with economic markets. With the turbulence brewing currently, not just with the “Frexit” matter but also in the US with their international relations, current rates might be the lowest we will see before we potentially succumb into another international financial drama. If conditions are good, be wise and hit the brakes – pull the rates.
