Oil prices have a direct impact on mortgage rates because inflation is the enemy of value over time.

When energy costs rise, it filters through the entire industry, transportation, goods, and services all become more expensive.

That upward pressure fuels inflation, and inflation pushes bond yields higher… which ultimately drives mortgage rates up.

So now what?

For the moment, we wait. Gas prices are sitting at a four-year high, and if this trend holds, we could see inflation reaccelerate just as it was starting to cool.

That puts the Federal Reserve in a tough spot. The market wants rate cuts, but rising inflation tied to energy costs makes that much harder to justify.

Bottom line: we want the Fed cutting rates, but oil may have other plans.

http://www.YourApplicationOnline.com