Derek McGowan traces how Middle East tensions closing the Strait of Hormuz push crude oil to $103 a barrel, driving inflation and mortgage rates up. Peace talks in spring dropped rates 0.5%, but renewed disruptions reversed that. Rates stay stuck in the mid-6% range until the strait reopens and oil prices fall.
What does oil have to do with your mortgage? Well, right now, everything. Though we all know there's things going on in the Middle East and the Strait of Hormuz has been cut off, and that's super inflationary. If anybody's watched the show Landman, you know just how important oil is in almost all industries. And a normal barrel of oil historically is about $75, $80 a barrel. Right now we're a little over $100, about $103. That right there makes the price of everything go up, which that is the definition of inflation. I've talked many times before, inflation is the enemy of mortgage rates, makes mortgage rates go up. Earlier this spring when there was peace talks, rates dropped rates dropped by about 0.5%. And then when, you know, things eased back up and the Strait of Hormuz was cut off again, rates went back up about 0.5%. So the biggest catalyst for rates to get back below 6%— right now an average 30-year fixed conventional is in the mid-6s— the biggest catalyst would be the Strait of Hormuz opening up, inflation coming down, oil prices coming down. So the best thing you can do if you're a buyer in the housing market is be pre-approved early, look for your house, and be ready to pounce on locking in your best rate with a trusted lender the moment that things subside and rates drop.
