How Brexit will impact you

By Dan Pultr, Vice-President, British Columbia

(With files from Gina Monaco)

All news channels, and most of the world, have become obsessed with Brexit, for good reason. In what is a now a historic moment, the majority of voters in the United Kingdom voted to exit the European Union (EU) – a partnership that came into existence after the Second World War. It morphed into an economic and political union of 28 countries working as a single market, which allows free movement of goods, capital, services and people between member states.

The negative effects of this decision was immediate – markets dropped, currency values fell and trade relations have become shaky. The reason  -- uncertainty. No one knows the long term implications -- not the economists, not the leaders of the remaining countries, not even those who voted to leave.  And it may take years to find out.

What we do know, however, is with uncertainty comes changes and it could and most likely will impact Canada, specifically our housing market. Here are a few ways that Brexit may affect you:

Interest rates will remain low
The immediate impact of the post-Brexit vote on Canada's economy will be pressure to keep interest rates at historically low levels, according to BMO chief economist Douglas Porter. That's good news for consumers. The U.S. Fed, which seemed ready to hike rates in September, will likely delay that decision, for now. In Canada, economic conditions continue to support low interest rates and a delay by the US will almost certainly leave things unchanged. The Bank of Canada's latest rate announcement held the overnight rate at .05%, which is good news for variable rate mortgage and loan clients.

The Loonie
The Loonie fell fast after the vote, relative to the US dollar. In the end, it lost more than a full cent, closing at 76.93 cents US. However, on a positive note, relative to the Pound and Euro, the Canadian dollar has strengthened, as Europe grapples with the economic fall out, so if you're headed to the U.K. or Europe, chances are you'll be pleasantly surprised with the exchange rate.

Your savings
If some of your savings are in equities or mutual funds, the Brexit vote may have had a surprise negative impact on your portfolio. However, most economists don't believe another financial crisis is at hand. Historically, markets tend to overreact at first then start to reclaim some of their losses. Although Brexit is cause for concern and has created uncertainty, the long term impacts are still not known and many are saying the reaction is overstated and to hold on until the dust settles.

Foreign investment in our real estate
Canada is at a crossroads right now. On the one side, many real estate investors will be looking for alternative stable regions to invest in than the UK at the moment, and Canada may be the most attractive. That said, foreign investment in Canadian real estate has already been cause for concern in some key markets. In the short term, there will definitely be an increased demand for Canadian Real Estate from St. John’s to Victoria, to Vancouver and Toronto. The key development will be how foreign investment in real estate is handled by policy makers.

While Brexit has created uncertainty in a dramatic way, there is an upside. If you're searching for a new home, you’ll continue to enjoy record low interest rates and your home may be worth more than ever before. If you’re looking to refinance to pay off debt or lower your borrowing costs, increased property values and low interest rates help home owners unlock some of that equity they’ve built up as property values continue to rise and the most advantageous terms.

The Brexit Vote

Written by Mark Kerzner, President, TMG The Mortgage Group

For the last few weeks we have been seeing flashes of news stories on the upcoming BREXIT vote, and this morning we have seen the results. Britain has voted by a narrow margin to withdraw its participation in the European Union (EU).

I have to admit I am a little bit of a political junkie. I often have CNN.com in my background at work and spend my time in the car listening to satellite news radio. And while we (O.K, I) were led to believe that the STAY vote would ultimately prevail, it was the LEAVE momentum that succeeded in the end.

Democracy in action is really a beautiful sight to see. Regardless of what position you had started on, everyone is now bound by the realities and the wishes of the majority. We see this storyline play out time and again. We see it happening in the US presidential election and we bear witness to it at home on a regular basis. Even if you were a staunch Harper supporter in the Fall election, Trudeau is our Prime Minister.

While there are certain elements of nationalism in recent social movements in western democracies there are also elements of xenophobia and demagoguery and those are the things that concern me.

Regardless of how close the polls had this vote, the markets were not anticipating this outcome. I actually was listening to a radio show yesterday afternoon that was quoting the U.K ‘bookies’ estimating this outcome at 20%. Since the markets were expecting a different result, the volatility that we have seen so far today was not to be unexpected.

The British Pound has fallen to a level not seen in 31 years, markets around the world are selling off and commodity prices (with the exception of gold) are falling.

I guess it is a little ironic in some ways that this movement to opt-out of an economic union has reminded us just how much we are all intertwined globally.

The UK amounts to a very small trading partner for Canada. That said, perhaps (just perhaps) this new global economic volatility will lead to a ‘natural’ slowing down of some of our heated housing markets. Perhaps the US Fed will remain on the sidelines a little longer before it starts increasing rates. Perhaps this will in some way help our housing concerns here at home.

At the end of the day though when all is said and done, we will continue to drive forward, our markets will eventually rebound and we will see the market swings subside … that is until the next geo-political item plays out.