Oil Prices and Mortgage Rates: A Surprising Connection

Most people think of oil prices in terms of what they’ll pay at the gas pump, but the impact goes far deeper. Energy costs ripple through nearly every corner of the economy, from supply chains to household budgets. And importantly, oil prices can serve as an indicator for where mortgage rates may be headed.

Oil is a critical input for energy and transportation. When oil prices rise, the cost of shipping goods increases, manufacturing becomes more expensive, and households feel the pinch in higher utility bills and gasoline prices. All of this feeds into inflation, the very metric that heavily influences interest rates.

On the flip side, when oil prices decline, inflation pressures ease. Supply chains become cheaper to operate, freight costs stabilize, and households get a break on energy expenses. Lower inflation helps keep a lid on bond yields and mortgage-backed securities (MBS) yields, which are the true drivers of mortgage rates.

Oil prices have already fallen about 25% from early this year. With news that OPEC may increase production, prices could drop even further. Analysts are watching a key threshold: $60 per barrel. If oil prices break below that line and sustain it, the effect could ripple across the economy:

• Energy and supply chain costs would likely stay lower

• Inflation pressures would be kept in check

• Mortgage rates would likely hold at or near their new lower levels

For homeowners and buyers, that’s welcome news after 18 months of artificially high mortgage rates.

There is a catch: oil prices that fall too low can backfire. When prices dip below production costs, wells shut down because it’s no longer profitable to operate. That reduces supply, and when supply contracts, prices can rebound sharply higher.

In other words, while moderately lower oil prices support stable inflation and lower mortgage rates, a crash could sow the seeds for a retracement, pushing prices—and inflation—back up again.

For homeowners, this isn’t just an abstract economic discussion. Lower oil prices and the resulting drop in inflation pressures can directly affect mortgage refinancing opportunities.

Many households are burdened by record levels of credit card debt, auto loans, and student loans.

With mortgage rates finally easing, homeowners can use their home equity to reset their household finances.

A well-timed refinance can lower monthly mortgage payments, wipe out high-interest consumer debt, and free up cash flow for savings and investments.

The reprieve from lower energy costs, combined with lower mortgage rates, creates a powerful opportunity to restructure household budgets.

We’re in a unique moment. Oil prices are trending lower, inflation is cooling, and mortgage rates have moved down from their peaks. That combination won’t last forever; markets are dynamic, and conditions can shift quickly if oil rebounds or economic data surprises to the upside.

Don’t wait on headlines. If lower rates make financial sense for your household, start planning now. Whether that’s a refinance to eliminate debt, a shorter loan term to build equity faster, or simply reducing your payment to free up monthly cash flow, the key is to act strategically.

Oil, Mortgages, and Tommy’s Lesson from Landman

If you caught the series Landman, you’ll remember Tommy explaining the farmout deal to Rebecca. Layer after layer of shale, the risk of drilling, and the need for every strike to fund the next—it’s a masterclass in how energy deals are structured. At one point, Tommy reminds her:

“Our great-grandparents built the world that runs on this s*** right here. Until it starts running on something else, we’ve got to feed it, or the world stops.”

That line hits home. Energy fuels everything—from the trucks delivering goods, to the factories making them, to the homes we live in. And as our recent analysis shows, oil prices don’t just matter at the pump; they ripple directly into inflation, bond yields, and ultimately, mortgage rates.

Right now, oil prices are trending lower, inflation is easing, and mortgage rates have dipped from their peaks. For homeowners, this is the moment to strike: refinance high-interest debt, lower your monthly payment, or build equity faster. Just like Tommy’s deal, every smart move you make has to fund the next—so your financial strategy compounds into something bigger.

We can’t control where oil prices go, but we can decide how to position ourselves when opportunity hits. The world may still run on oil, but your household wealth can run on strategy.