War in the Middle East + Weak Employment numbers = Mortgage Rate Uncertainty

Ten days ago, for the first time in three years, the average 30-year fixed-rate mortgage fell below 6%. That lasted about a week. We are now back up to the average rate of around 6%.

The war in the Middle East is causing great uncertainty in the financial markets, and financial markets do not like uncertainty. As everyone has seen at their local station, gasoline prices have risen each day over the last week. This is causing rising inflation expectations. The war in the Middle East has disrupted a major oil shipping passage, and the impact may not be temporary. Inflation is not good for mortgage interest rates because it means that the Fed may delay or eliminate the expected interest rate cuts this year.

The weak employment report released Friday caused more fear and uncertainty. It puts the Fed in a precarious position, given its dual mandate of stable prices and maximum employment. It is hard to manage both at the same time. At this time, no rate cut is expected this month. Mortgage interest rates are still much lower than at the same time last year, but the future is unclear.

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