For those who haven’t heard, last week the UK experienced a historical shock when British voters surprised everyone and voted in favor of a British exit, aka Brexit, from the European Union. With the news of the UK withdrawing from the European Union, experts have been in major debates over the future trickle effects this action may have across the world’s economy. Figures already show a $2 trillion loss to investors; this is the worst one-day drop on record according to data from S&P Global. .
“How could a decision the United Kingdom made possibly have anything to do with me?” you might ask. Well, if economists’ predictions are correct, with their state in turmoil we will begin to see an increase in foreign and domestic investment here in the states. Basically, the dollar is the safe betright now and investors will begin replacing their money from UK and EU currency to US currency. This in turn will strengthen the US dollar as the British pound and euro decrease in value.
Experts are saying the Brexit outcome could directly affect the amount of interest you get on your bonds and CDs savings. If you are unfamiliar with how interest yields work, ultimately the Federal Reserve (our country’s central banking system) regulates and monitors global financial markets in order to maintain a stable financial system. So, since we are on the brink of a likely volatile market, the feds are in damage control mode; meaning a hike in yield rates are unlikely in the near future.
The Fed released the following statement, “The Federal Reserve is prepared to provide dollar liquidity through its existing swap lines with central banks, as necessary, to address pressures in global funding markets, which could have adverse implications for the U.S. economy.”
Although Brexit could possibly have negative implications for savers, there is a light in the darkness. Experts say mortgage rates are expected to drop to historic lows as individuals look for more secure investments. This is great news for consumers in the market to buy or refinance homes as they can take advantage of the low rates.
As the Brexit vote is still relatively new, we are still in a state of uncertainty as to what the actual economic effects will be. Many experts believe there will be no major economic effects at all. It is too soon to really gauge the long term impact Brexit will have