Although most forecasts Orion’s management has seen call for higher interest rates as we move through 2022, predicting where mortgage rates will go from here feels even more up in the air and volatile than normal. Orion’s staff is not in the business of predicting interest rates. We are in the business of helping our brokers help your clients. Yes, mortgage rates are currently low from a historical stand point, but brokers should be aware of the two primary influences on rates in general: thoughts about what our own Federal Reserve Open Market Committee is doing, and news about Russia’s invasion of Ukraine.

In his testimony to Congress on Wednesday of last week, Fed Chair Jay Powell confirmed his support for a 25-basis points interest rate hike at the FOMC's next meeting in two weeks. Bond markets, and therefore mortgage rates, have been pricing inthe new monetary cycle for months. Sure enough, the jobs report on Friday showed a strong American labor force, with a non-farm payroll gain of 678K. The hot U.S. jobs market is a sign of the strong economy, almost certain to lead to higher mortgage rates, especially when combined with the inflation that ispresent.

We’re seeing inflation everywhere, but the impacts of the war in Ukraine have created market uncertainty. So interest rates are expected to stay low in the short-term, but will likely increase in the coming months. Yes, mortgage rates fell as investors moved to the safety of bonds due to growing tensions between Russia and Ukraine. Experts and analysts had forecasted a fairly steady rise for mortgage rates this year, but Russia's invasion of Ukraine followed by severe economic sanctions has created uncertainty.

The fighting has already brought the tragedies of death, destruction, and a humanitarian crisis. Very much secondarily, it will impact global financial markets, including U.S. mortgage rates.

Investors are concerned about the deepening Russia-Ukraine conflict and rising oil prices,and are wary of spill over effects from rising economic sanctions. So while markets are watching mounting inflation and economic growth, and there is an expectation of the Federal Reserve proceeding with a 25-basis-point hike at its upcoming meeting later this month, Russia’s attack that began on February 24 is dominating stock and bond markets.

Our brokers know that mortgage rates have increased 1 percent or more in 2022 with the expectation they’d expand further throughout the year. But this conflict adds an opposing force to the mix, and could potentially hold rates steady if not push them lower. Interest rates tend to decrease in times of precarious events, much like they did around the first Covid pandemic lockdowns. The length of the conflict in the Ukraine will determine how much downward pressure is applied to mortgage rates since investors usually place more capital into safer assets (like U.S. fixed-income securities and mortgage–backed securities).

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