Will inflation increase mortgage rates even further? I’ve been asked this question many times over the past week, and the answer is that long-term inflation typically creates an environment in which the Fed responds by raising interest rates. The war in Iran has disrupted the flow of oil to much of the world, and the immediate result has been higher gasoline prices.
Higher oil prices affect almost everything we buy and use in our homes. Increased diesel prices mean higher transportation costs for most goods. In addition, oil is used in the production of thousands of everyday products. Historically, rising oil prices have been one of the key factors driving inflation.
If the war continues, long-term inflation could rear its ugly head again in a significant way. Should the Fed raise rates to slow inflation, that move would likely push mortgage rates even higher. Only time will tell, but the last thing our national housing industry needs right now is another increase in mortgage interest rates.
This short article was published in Inman News this week.
Mortgage rates surged higher this week as the market responded to the war with Iran, rapidly eroding purchasing power from homebuyers who are headed into real estate’s peak season.
Mortgage rates had fallen to the lowest point in more than three years last month. That was before the U.S. and Israel began a military campaign in Iran that sent gas prices skyrocketing.
But as the military campaign ramped up, rates followed, rising from a low of 5.99 percent near the end of February to 6.62 percent as of Friday afternoon, according to Mortgage News Daily.
As a result, a buyer attempting to buy a median-priced home with a 20 percent down payment would have lost more than $21,000 in purchasing power without increasing their monthly payment.
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Haas Team Real Estate
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