Mortgage Rates Moderately Higher
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by Trevor Sines

Mortgage rates rose moderately today, bringing them roughly back in line with Monday’s levels.  For the record, that leaves us in slightly better shape than last week, which saw the highest rates in more than a year.  Today’s bond market weakness was driven primarily by the much-anticipated OPEC deal.  What is the OPEC deal and why is it impacting mortgage rates?  

The OPEC deal essentially serves as an agreement among OPEC countries to limit oil production.  The goal is to push oil prices higher.  Higher oil prices imply higher inflation, and inflation is an enemy to low interest rates.  With this logic, it would be easy to assume that rates would move higher any time oil prices moved higher, but that’s definitely not the case.  Today’s OPEC deal did more damage by influencing long-term inflation fears.  After all, if OPEC countries are willing to come to agreements like this, bond markets (which drive mortgage rates) need to account for the threat of general upward pressure on prices (due to higher fuel costs), all other things being equal.  

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