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The Russian Invasion is Putting Upward and Downward Pressure on Mortgage Rates. Where Will They Land?

The Russian Invasion is Putting Upward and Downward Pressure on Mortgage Rates. Where Will They Land?
Rob Chrisman headshot
Home.com Contributor

On February 24, Russia essentially declared war on Ukraine and invaded the country. Gone are headlines focused on the pandemic; they have been replaced by news about the attack. In a similar fashion, financial headlines have focused on inflation. Both the war and spiraling prices are influencing mortgage rates in some predictable, and not so predictable, ways.

The cascading impacts of the war in Ukraine have created market uncertainty and volatility. Russia’s invasion of Ukraine, followed by economic sanctions in an effort to grind Russia’s economy to a halt, has created an environment that pushed mortgage rates lower.

We’ve seen the textbook “flight to quality” exhibited by investors.

In times of chaos, individuals, companies, and nations tend to hunker down, often moving investment dollars from riskier assets, such as equities, to less risky assets, such as bonds… and securities backed by U.S. mortgages. And since investor interest in, and demand for, fixed-income securities (like mortgages) drive prices and rates, this has been especially direct.

How mortgage rates could respond

Like any act of war, the fighting in Ukraine will bring the tragedies of death, destruction, and a humanitarian crisis. And it has impacted global financial markets, including U.S. interest rates.

Up until the attack we’ve seen mortgage rates grow significantly this year with the expectation they’d go even higher throughout 2022. But this conflict, with the flight to investors buying bonds, adds an opposing force to the mix, and could potentially hold rates steady if not push them lower.

Geopolitical tensions caused U.S. Treasury yields to drop as investors moved to the safety of bonds, leading to a drop in mortgage rates.

But that is only half the picture. Inflationary pressures remain, especially with oil prices, and economists believe that inflation, and a strong U.S. economy, will influence mortgage rates more over the next several months, especially if the Russian attack ceases.

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.

If the Russia-Ukraine conflict drags on, oil prices will rise further, and the spillover effects from rising economic sanctions will be felt. Stock and bond markets have their eyes on mounting inflation and an expectation that the Federal Reserve will proceed with a 25-basis-point hike at its upcoming meeting this month.

In other words, market volatility and rising oil prices are likely to push bond yields into larger swings, inflation will keep upward pressure on mortgage rates, and the wild card is Ukraine.

Related reading: As a Homebuyer, You Can Turn Inflation From an Enemy to a Friend

Two forces on mortgage rates: one pushing up, one pulling down

Interest rates tend to decrease in times of precarious events, much like they did around the first Covid pandemic lockdowns, but the length of the conflict in the Ukraine will determine how much downward pressure is applied to interest rates. And the flight to quality (with investors placing more capital into safer assets) historically leads to declining mortgage rates. But, as noted above, inflation and a strong economy are pushing interest rates higher.

The length of the conflict in the Ukraine will determine how much downward pressure gets applied.

What about the Fed?

To combat high inflation, the Federal Reserve previously announced it would be adjusting its policies and raising the federal funds rate multiple times in 2022.

While not directly tied to mortgage rates, the same economic factors influence both. Ukraine may change how aggressively the Fed ends up hiking its rates. The central bank will likely address its plans to navigate any uncertainty at its upcoming Open Market Committee meeting on Mar. 15–16.

Predicting where mortgage rates will go from here feels even more up in the air and volatile than normal. Rates are currently low from a historical standpoint, but certainly higher than they were six months ago. In general, rates are expected to stay low in the short-term, but will likely increase in the coming months.

But regardless of the war in Ukraine, current and future inflation, interest rate volatility, and the trend in interest rates, potential home buyers still want to own a home.


Mortgage rate projections are not a reflection of Fairway’s opinion or guarantee of interest rates in the current or upcoming market.

Further Reading

Fairway Advantage Pre-Approval is the Key to a New Home

$15k First-time Homebuyer Tax Credit 2021: All Your Questions Answered