Housing Trends February 25, 2022

War and Interest Rates

Our clients are curious to know what the conflict in the Ukraine will mean for mortgage rates.

The short answer is down in the near term and up in the long term.

Generally speaking, economic and political uncertainty drive people to invest in bonds rather than stocks, which puts downward pressure on interest rates.

So, in the near term, the conflict in the Ukraine will push rates down slightly.  We have already seen this happen as 30-year rates have dipped in the last few days.

The conflict is likely to push oil prices up which means higher gasoline prices.  This will cause upward pressure on inflation, which ultimately causes upward pressure on interest rates.

So, the longer the war lasts in Europe, the more likely it is to push interest rates even higher.