military conflict & mortgage rates…

The question of the week in our business is how mortgage rates will be impacted my military conflict in Iran.

Historically military conflict leads to uncertainty in financial markets.  This uncertainty is typically associated with a “flight to safety” whereby investors move money from higher risk options like stocks to safer assets like bonds, and mortgage backed securities (MBS).  Increased investment in the MBS market will lower rates, so the short term impact is often a small dip in rates.

However, the primary focus of the Fed at this point in history is inflation.  Rates have been increased by the Fed over recent years with the goals of decreasing spending and thereby lowering inflation.  Oil prices have a tremendous impact on inflation, and military conflict in the Middle East often leads to an increase in oil prices.  This is inflationary.

So far this week we have seen a spike in oil prices, which has had negative impact on mortgage rates, due largely to concerns about inflation.  However, the impact has been minimal with the increase in rates being less than 0.125% so far.

For the financial nerds, the movement in the markets is worth note.  However, the average homebuyer will see little impact to their actual rates and payments, at least based on what we have seen over the last few days.  Our advice is to stay calm and reach out to your trusted mortgage professional with any questions.