Global Events And Mortgage Rates

As we all know by now, there is some global uncertainty that is leaving people kind of anxious. For those thinking about buying or selling their homes, these events are worth monitoring. As rates have been climbing in recent months, it is important to understand why. Well, just a few weeks ago, according to Freddie Mac, the 30-year fixed mortgage rates approached 4% for the first time in years. Why, you might ask? Well, there are a few reasons that rates went to near 4% before falling due to the global uncertainty. Here is how global events and mortgage rates move together.

While rates hit almost 4%, we saw a global geopolitical event unfold. This actually overtook many headlines and ultimately has changed expert predictions on mortgage rates. As the Federal Reserve looks to raise rates to stamp out inflation, the mortgage market began to price these rate increases in. This is why we saw such a quick increase in mortgage rates, especially in January 2022.

Mortgage Rates According to Experts

The recent decline in the mortgage rates comes off the heels of a macroeconomic event. This event is the Russian invasion of Ukraine, as well as the sanctions that ensued. However, experts are concluding that the drop in mortgage rates was due to happen, regardless of the invasion. Here is a quick look at some of the well-known real estate economist’s opinions.

According to Odeta Kushi, Deputy Economist at First American:

“While mortgage rates trended upward in 2022, one unintended side effect of global uncertainty is that it often results in downward pressure on mortgage rates.”

Later in another interview, Odeta Kushi said:

“Geopolitical events play an important role in impacting the long end of the yield curve and mortgage rates. For example, in the weeks following the ‘Brexit’ vote in 2016, the U.S. Treasury bond yield declined and led to a corresponding decline in mortgage rates.”

These comments come as a headwind of geopolitical uncertainty remains in the markets. It is important to note from Kushi that mortgage rates and the long-end of the yield curve are impacted by global events. Global events and mortgage rates move hand-in-hand. As expectations for slower economic output are put into fruition, the mortgage market is quick to price this in. The 10-year Treasury yield is a leading indicator in mortgage rates, and one of the best ways to follow mortgage rates. Political events throughout the world in the biggest nations can have an impact on mortgage rates back home.

Global Events And Mortgage Rates

Mortgage Rates Have Ran Up This Year, But Have Dipped On Global Uncertainty

Will Rates Stay Below The Highs?

There is actually no possible way to predict if mortgage rates will stay down because of how liquid the overseas situation is. If there is a cease-fire that is signed in the next week, mortgage rates could start focusing on the Federal Reserve again. There is a possibility that the mortgage market prices in multiple rate hikes over the next 12-months. Just how many hikes, however, depends on how the Federal Reserve sees the economic outlook and inflation.

Sam Khater, Chief Economist at Freddie Mac says:

“Geopolitical tensions caused U.S. Treasury yields to recede this week . . . leading to a drop in mortgage rates. While inflationary pressures remain, the cascading impacts of the war in Ukraine have created market uncertainty. Consequently, rates are expected to stay low in the short-term but will likely increase in the coming months.”

Global Events And Mortgage Rates Volatility

Rates are likely to fluctuate and remain volatile as the situation overseas develops. Global events and mortgage rates will look to move in tandem as well. Before long, there are going to be more increases in mortgage rates, according to economist. After the global event becomes a thing of the past, expect mortgage rates to actually tick up. The real estate market is still red hot, and higher mortgage rates are the only way to slow it down. The next few weeks will be interesting and important to follow.