Absolutely! The Iran war is currently putting upward pressure on mortgage interest rates, although it’s not the only factor affecting them.
Here’s the chain of events:
- The conflict has driven oil prices higher. Concerns over shipping through the Strait of Hormuz have caused crude oil prices to jump sharply.
- Higher oil prices increase inflation expectations. More expensive gasoline, diesel, and transportation costs ripple through the economy, making investors worry that inflation will remain elevated.
- Treasury yields have risen. Investors are demanding higher yields on U.S. Treasury bonds because they expect inflation to stay higher and the Federal Reserve may have to keep interest rates elevated for longer. The 10-year Treasury yield recently climbed to around 4.6%.
- Mortgage rates generally follow the 10-year Treasury yield. As Treasury yields rise, lenders typically increase mortgage rates. National average 30-year fixed mortgage rates have moved back into the mid-6% range
So what does this mean for homeowners?
- If the conflict continues or worsens, mortgage rates could remain elevated or increase modestly.
- If there is a permanent and meaningful ceasefire or a resolution, oil prices may fall, inflation concerns could ease, Treasury yields may decline, and mortgage rates could gradually move lower. However, they are unlikely to fall dramatically unless inflation also cools significantly.
Pray for peace and a resolution soon!
