Oil pump in a field, far away.

Do Oil Prices Affect Mortgage Rates?

January 29, 2024 3-minute read

Author: Jamie Johnson


If you’re in the process of buying a home, you might wonder how your lender came up with your mortgage rates. The truth is, there are a variety of factors that determine your mortgage rates. And while the two things may seem unrelated, oil prices can indirectly cause your interest rates to rise.

What Causes Oil Prices To Change?

Like most products, oil prices are controlled by supply and demand, and when the demand rises, the supply goes down. When the demand outpaces the supply, sellers start to raise their prices.

Natural disasters can also cause oil prices to fluctuate. For instance, when Hurricane Katrina hit in 2005, it caused oil prices to briefly spike to more than $70 per barrel before dropping.

Political instability, particularly in the Middle East, can also lead to rising oil costs. Another factor that can have an impact on oil prices is production costs and storage levels.

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How Oil Prices Affect Mortgage Rates

It can be hard to see how rising oil prices can affect the interest you pay for your mortgage. But there is an indirect link between oil prices, inflation and interest rates. When oil prices start to go up, it does more than raise gas prices.

Your mortgage rates are the interest charged by your lender to take out a home loan. Your interest rate is a percentage you pay to borrow money for a set period of time.

Your interest rate can be fixed or variable, depending on your loan agreement. And your annual percentage rate (APR) includes your interest, fees and any other expenses that come with the loan.


Rising oil prices often cause the cost of producing and shipping goods to rise as well, which is known as inflation. When these prices rise quickly, investors increase the amount of money they charge borrowers.

The Federal Reserve may raise the rate it charges banks, and lenders will pass these costs onto borrowers. So when the price of oil goes up, these costs are often felt across the board.

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Investing In U.S. Bonds

One of the biggest predictors of mortgage rates is the yield on the 10-year Treasury note. If the yield is low, then mortgage rates are often low.

Oil and similar commodities are traded in the futures market. In this market, buyers and sellers agree on the price at which future barrels will be bought and sold.

Futures are risky for parties on both sides of the aisle. That’s because production costs can rise or fall between when the agreement is made and when the payment occurs.

When prices begin dropping, investors will often turn to U.S. bonds for more security. Treasury bonds are always paid off to prevent the government from losing the confidence of its creditors and investors.

But if everyone starts buying bonds, it drives down yields since the government doesn’t have to offer a high rate of return to incentivize people to invest. When the yield goes down, mortgage rates go down as well. 

What To Do When Mortgage Rates Are Affected By Oil Prices

Here are a couple of steps you can take if mortgage rates are currently rising or falling.

Buy Or Refinance

When mortgage rates are low, this is an excellent opportunity to buy a new home or refinance. If you’re able to secure a lower interest rate, refinancing can save you thousands of dollars over the life of the loan.

If you’re in a position to do so, investing in real estate is a great way to build financial independence. Whether you’re looking to buy a home or an investment property, it’s essential to act fast when rates are low. Rates will not stay low forever, and market conditions can change quickly.

Be Patient

If mortgage rates are currently rising or in flux, it’s important to remain calm. Mortgage rates change very slowly, though the amount your lender will charge you can vary quite a bit.

You can’t control oil prices or interest rates, but you do have some control over how much you pay for your mortgage rates. If you’re in the process of buying a home, your best bet is to shop around and compare quotes from multiple lenders.

The Bottom Line

Oil prices can have a direct relationship with mortgage rates. When oil prices go up, mortgage rates often begin rising. However, these rates will not last forever. If you’re in a season where rates are low, this could be a good time to buy a home or refinance.


If mortgage rates are currently high, your best bet is to compare offers from multiple lenders. If you’re interested in learning more about mortgages, refinancing or home buying, be sure to visit the Rocket Mortgage® Learning Center.

Jamie Johnson

Jamie Johnson is a Kansas City-based freelance writer who writes about a variety of personal finance topics, including loans, building credit, and paying down debt. She currently writes for clients like the U.S. Chamber of Commerce, Business Insider, and Bankrate.