Mortgage rates in America could drop if fighting between the United States and Iran ends soon, according to housing experts. Right now, mortgage rates are higher partly because the conflict creates uncertainty in global markets. When there is uncertainty, banks charge more to lend money for homes.
The connection between wars and mortgage rates works through oil prices and bond markets. When countries fight in the Middle East, oil prices usually go up because people worry about supply getting cut off. Higher oil prices push up inflation, and that forces banks to charge more interest on loans, including mortgages. If peace talks succeed and the conflict ends, oil prices would likely fall, which would reduce pressure on mortgage rates.
American families looking to buy homes would benefit most from lower mortgage rates. Right now, a family borrowing $400,000 to buy a house pays thousands of dollars more per year if rates stay high instead of dropping. Even a small drop of one-half of one percent in mortgage rates saves families thousands of dollars over the life of a loan. Renters who want to become homeowners are waiting to see if rates will fall before buying.
Housing economists are watching peace negotiations in Qatar very closely to see if the Iran conflict could end in the coming weeks or months. If negotiations fail and fighting continues, mortgage rates will likely stay elevated or climb higher. Banks usually announce rate changes within days of major news about global conflicts or oil prices. The Federal Reserve, which controls some interest rates, will also watch the Iran situation before deciding whether to raise or lower its own rates.