• The national average mortgage rate dropped eight basis points to 3.3 percent last week.
  • Foreign investors may begin to use American real estate as a safe haven for investments.
  • Economists anticipate the Federal Reserve holding off on aggressive interest rate hikes this summer.

Zillow announced the current national 30-year fixed mortgage rate dropped from 3.41 percent to 3.37 percent last week.

According to the real estate website, the drop could be partially due to the recent 52-48 referendum vote in the United Kingdom to leave the European Union, otherwise known as “Brexit.”

“Brexit has certainly impacted mortgage rates,” said Jordan Levine, economist at the California Association of Realtors. “But one of the things we have been noticing even prior to Brexit was that mortgage rates were softening again.”

According to Zillow Mortgages, 30-year fixed rate mortgages in California dropped 13 basis points to 3.31 percent last week. However, the 15-year fixed rate slightly climbed to 2.59 percent.

[graphiq id=”lURq4Q0kOep” title=”Brexit Market Reactions, June 29 – Percent Change” width=”600″ height=”540″ url=”https://w.graphiq.com/w/lURq4Q0kOep” link=”https://www.graphiq.com/vlp/lURq4Q0kOep” link_text=”Brexit Market Reactions, June 29 – Percent Change | Graphiq” ]

Levine described how the drop in mortgage rates “stays the hand of the [Federal Reserve]” in terms of aggressively hiking short term rates in the U.S.

“I think there’s kind of both short-term affect from the short end of the yield curve in terms of introducing a lot of global uncertainty, and probably reducing outlook and global growth over the short run,” he said.

The American dollar is safe, for now

Both New York City and Los Angeles held the No. 1 and No. 2 spots on a list of where foreign investors are buying real estate — together taking in more than $21 billion during the first quarter of 2016. L.A. scooted past No. 3 (London), but only by about $700 million.

“Real estate is a safe bet,” Levine said. “On the one hand you have a stronger dollar, which makes real estate less affordable. But that issue will be more than offset by the idea of protecting your capital, and I think U.S. real estate tends to appreciate in real terms.”

The average 30-year fixed interest rate mortgage in Illinois dropped eight basis points to 3.33 percent last week from the previous week’s 3.41 percent average. The 15-year fixed mortgage rate increased one basis point to 2.58 percent.

Rates in Florida dropped, but not quite as much California and Illinois, falling five basis points to 3.3 percent. But 15-year fixed rates actually increased two basis points to 2.58 percent.

“Florida is a major landing point for [international] money,” said Brad O’Connor, chief economist at Florida Realtors. “International investors love Florida … our luxury residential market and commercial market in South Florida and Tampa draw a lot of foreign capital.”

O’Connor speculates the British pound will weaken, as will the Euro, during this time of uncertainty.

Mortgage rates in Texas decreased to 3.32 percent last week from the previous week’s average of 3.39 percent. The rate for 15-year mortgages did not change from 2.58 percent.

Last week’s average mortgage rate in New York started at 3.52 percent, but that number dropped to 3.44 percent by week’s end. The current average 15-year fixed rate dropped four basis points to 2.68 percent.

Mortgage rates in Maryland and Washington D.C. might show a different picture, though. Maryland rates actually increased last week to 3.3 percent, but only by one basis point. Rates in D.C. dropped, but only by two basis points to 3.31 percent. In the District, 15-year fixed rates climbed to 2.58 percent, while 15-year rates in Maryland climbed to 2.59 percent.

“I think people will be trading value for stability, and obviously there is not a whole lot of stability over there right now,” said O’Connor.

Email Britt Chester

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