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by | Aug 18, 2016 | Mortgages | 1 comment

Why does Britain want to leave the EU?

This is the million dollar question.

Even though Britain has always had a difficult relationship with the EU, the call for Brexit gathered a lot of strength after the 2008 financial meltdown and the Syrian refugee crisis.

The ties between Britain and the EU have been uneasy for a long time now. According to The Economist, starting in the 1950’s only 10 percent of British exports went to the six countries which formed the European Coal & Steel Community (ECSC). But since Britain missed the opportunity to join the EEC in 1955, it has been a series of financial ups and downs.  In 1973, when Britain eventually joined the EU under Edward Heath, trade began to soar.  The European economy began to decline and Britain’s share of the total declined as well.  The EU now takes over 51% of British exports of goods.  In 2008, the financial crisis added strain to the already shaky political institutions of the EU.

The EU’s liberal rules on migration have also given Britain all the more reason to go for a Brexit. Even though Britain refused to accept the Schengen agreement, EU law still required member states to admit an unlimited number of migrants from other EU countries. Large-scale migration of laborers from other less affluent EU states like Poland and Portugal to Britain has led to lower wages for the local British citizens.

The Syrian refugee crisis only worsens this situation. For example, in February this year, the International Organization for Migration said that 76,000 people — nearly 2,000 per day — had reached Europe by sea from 1 January till February, a nearly tenfold increase over the same period the year before.

What happens if Britain leaves or stays?

One of the most obvious effects of a Brexit will be that it will encourage other member states of the EU to leave it, thus weakening the idea of a unified Europe.

If a Brexit actually happens, an independent Britain can negotiate a deal with the EU which grants British businesses the same benefits which they receive now, according to Vox. Norway (not an EU member state) has the same kind of deal with the EU.

Bottom line, what does it mean for interest rates?

World uncertainty (or any dynamic uncertainty) causes investors to move money from riskier investments to safer investments, in our case that means the Bond Market which is tied to mortgage interest rates.  More money in the Bond Market creates more supply than demand; therefore lower rates are the result.

We are already in an extremely low rate environment, so don’t play the game and get stuck when rates go up.  Use a lender that will lock you in and offers a “float down”.  If rates get considerably better, your rate can be floated to the current market rate, it protects you if they go up and gives you the benefit if they go down.   The nice part is that we at FM Lending have been doing it the same way for 24 years!

About FM Lending

Loan Officer Anthony Pellegrino, of the Fonville Morisey Lochmere Office

FM Lending Services is a full service mortgage banker specializing in residential purchase and refinance loans in North Carolina since 1992. FM Lending Services offers a wide range of mortgage products and is consistently awarded the highest rankings by the North Carolina Housing Finance Agency and USDA. We have built a strong reputation in the Carolina’s for service, on time closings and professionalism. We pride ourselves on serving the lending needs of real estate professionals and their clients and many of our originators consistently rank in the TOP 1% of Mortgage Originators in the country*. It’s our mission to create an extraordinary customer experience through the efforts of our knowledgeable and caring mortgage professionals where relationships are valued and the focus is on treating every client with white glove service. We’ll work closely with you throughout the financing process, helping provide valuable information so you can make informed decisions.

FM Lending Services (Prosperity Home Mortgage, LLC dba FM Lending Services),  *Ranked by Loan Originator Magazine