While the ongoing conflict between Ukraine and Russia may not directly affect the United States, both a human and an economic toll is prevalent. Some of the most recent examples of this include the climbing gas prices and fluctuating interest rates.   

During widespread uncertainty and anxiety, it’s helpful to understand how this may affect today’s housing market and interest rates. As these challenging times continue, here is what you should know about interest rates in the United States.

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For Starters- International Conflict Increases Economic Uncertainty 

Prior to Russia’s invasion of Ukraine, the Federal Reserve had already begun discussions to raise interest rates. As news broke about the international conflict the Feds decided to halt any decisions regarding rates. Because of this, many people are left feeling unsure and concerned about the direction rates will go in the weeks ahead.

Generally, when there is an international conflict, the Feds will keep calm and avoid raising interest rates right away. Since the Fed must act in terms of the direction of the economy, there may be a delay in any rate increases, including mortgage rates.  

Past Examples- Mortgage Rates Go Down 

It’s important to understand that uncertainty is expected during these times. However, we can turn to past examples to better predict what the future may hold.  

Past major conflicts: 

  • In September 2014, the United States got military involved in the Syrian civil war. Rates fell from 4.25% to 4%. 
  • In 2014, Russia annexed Crimea. During this international conflict, rates dropped from 4.50% to 4.25%. 

Typically, there has been a recurring trend where rates tend to decrease during times of international crisis. Nothing is certain, but it is possible that this trend could continue. 

Why Rates Tend to Lower During International Conflict? 

Digging a bit further, there is reason for the potential for rates to decrease during this time. James Anderson, from Greater Nevada Mortgage, addressed this trend saying, “When we have uncertainty, we usually see the mortgage rates decrease a bit.” Essentially, during times of unrest, investors tend to take their money from the stock market and put it in the bond market. The stock market has more risk than the bond market, making this a viable decision made by investors.  

You may be wondering- how does that affect mortgage rates? Well, mortgage rates are tied to the bond market. Therefore, when more investment money is put into bonds, mortgage rates will likely lower.  

Bottom Line- Mortgage Rates Are Hard to Predict 

Mortgage rates, like conflict, are hard to predict. What unfolds over the coming months will directly impact the wider economy and rates. It is likely you will see very different rates from different lenders. You may also see rates fluctuating frequently. If you are shopping for a mortgage loan, the most important thing to do is work with a qualified and professional loan officer who can help you navigate the interest rates and changing times. 

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