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You’ve likely heard the term “Brexit” thrown around the news a bunch in recent weeks. But what does it mean and how will it affect you?
Essentially, the word “Brexit” was created to describe the possibility of Britain exiting the European Union; according to the Lisbon Treaty, any EU member can leave the EU if they wish. But why is this issue climaxing now in 2016?
In short, the issue of Brexit arose during the United Kingdom’s 2015 election season, when key British political parties (who had different visions for Britain’s future) agreed to ask British voters "whether to leave the EU."
Since the Brexit vote was hyper political, the recent majority vote to leave the UK triggered the resignation of British Prime Minister David Cameron, who actively supported the “stay” movement. The UK’s decision to leave also sets into motion uncertain negotiations between the UK and the remaining EU members to define their future relationship.
As you might imagine, this is a time-consuming process — not to mention that the current European Council rules give the UK a two-year window to wrap up negotiations. Plus, the UK’s popular vote to leave the EU was non-binding, which means it might still not happen — although that’s highly unlikely at this point.
The full effects of Brexit globally and in the United States are still ambiguous. As noted above, the Brexit vote leaves a great deal of uncertainty surrounding the future of the EU and the politics of the UK moving forward (will the UK itself remain united?), along with the future of business in the region.
Keep in mind that many large EU corporations are headquartered in London, and a significant portion of the UK economy relies on importing goods to the EU. If businesses see the UK as too politically risky, they may begin moving resources to other countries, negatively impacting the UK economy and therefore global growth as a whole.
That said, try not to worry too much. While economic risks exist, this isn’t 2008. U.S. banks are relatively healthy as is the real estate market. At the moment, the overall risk to the U.S. economy is muted.
In the near term, if businesses don’t handle EU uncertainty well, business growth may slow due to a lack of spending and investment. In the longer term, should Europe’s economy weaken considerably, the U.S. would likely be affected in our exports and global competitiveness.
Overall, though, U.S. consumers should feel good about the future and have the mindset of "business as usual," keeping in mind it will likely be months, if not longer, before the ambiguity around Brexit abates.
Britain’s decision to leave the EU impacts Alliant minimally. As you likely know, all deposit accounts at Alliant are federally insured up to $250,000 through the NCUA and are not exposed to stock market volatility.
You may actually be surprised to know that Alliant typically grows in membership during economic down periods, as we’re seen as a safe haven for funds. We expect our size to increase slightly beyond our current size of $9 billion in assets.
Regarding savings and loan rates, our Alliant rates hem closely to the rates set by the Federal Reserve. Keeping in mind Brexit doubts, the Federal Reserve will likely decide to hold short-term interest rates near historic lows.
Frozen interest rates would be good news for Alliant members looking to take out new loans because loan rates will remain lower for a longer period. Brexit will likely be great for mortgage seekers.
Alliant members with high rate checking and savings accounts should also feel confident, knowing Alliant’s rates are comparatively higher than those at other financial institutions; Alliant interest rates are currently set at 1.00% APY for high rate savings and 0.65% APY for high rate checking.
Alissa Green is the Digital Marketing Manager at Alliant. She has 10+ years experience writing/blogging and has written for Jezebel, The Onion, MyFirstApartment.com, and MyFirstCondo.com amongst other sites. The best piece of financial advice she’s gotten was from her mother, who says one should never try to beat the market (thanks, mom!). In her spare time, you can find Alissa enjoying the local comedy scene, exploring different Chicago neighborhoods, supporting the Chicago Humanities Festival and reading up on FinTech.