What Does Oil Have to Do with the Mortgage Business?

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Filed under: Market Comentary

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Do you know that there is a connection between oil and the mortgage business? Most people would never make this association, which is why I wanted to talk about it.

What Did OPEC Decide?

OPEC (The Organization of the Petroleum Exporting Countries) basically oversees the multi-national price-fixing of our oil. They control the output of oil.

They held a meeting today, and the anticipated conversation around the meeting is that they were planning to cut oil production by a million barrels per day. It turns out, they decided to double it and cut back on oil production by 2 million barrels per day.

In the current situation, with all of the unrest and situations happening in Europe, we are seeing oil prices down but gas prices are up here in the US. OPEC is going to reduce the output. This decision causes a natural economic response that will cause oil prices to increase due to supply and demand.

How Oil Prices Affect Mortgage Rates

There is a lot about this topic that I know nothing about. But I can share my opinion about how it affects mortgages. In the mortgage business, OPEC’s decision comes across as inflationary. This change will drive up oil prices, and energy is also a big component in the inflationary numbers.

So, the market didn’t really love the announcement today. Initially, the market hated it and started freaking out. But then it bounced back a little. Apparently, the oil-producing countries aren’t all pushing out their oil anyway.

The real story here is that any time something happens that looks inflationary, it will be bad for mortgage rates. The good news is that we are getting to the point now where it looks like inflation might have peaked and should be coming back down. Hopefully we will start to see rates dropping by the end of the year or into the beginning of next year.

Let’s Find a Mortgage Solution for You

If you are ready to buy a home, then reach out and I will help you find the best options. Take the rate you can get right now – remember that you can always refinance in the future. Eventually, rates will go back down (it’s been proven in history over and over again). There are always financing solutions, regardless of what is happening in the market.

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