There are so many things that affect mortgage rates: Geopolitical news, currency exchange, stock market, employment...you name it. The main thing that will push rates higher or lower is inflation. The reason inflation is ultimately the largest influence on interest rates is that inflation erodes the return an investor will receive on a bond investment. If a bond yields 3% and inflation is around 1% (as it is now) an investor is actually going to receive a 2% net return on their money.
If inflation moves up to 2.5% (still within the target range for the Federal Reserve) that same bond will only net .5% which is not very attractive to investors. So as inflation rises investors will require a higher yield on treasury's and mortgage bonds. If inflation moves up to 2.5% you will likely see the yield on a bond also move up to 4.5% to net the same 2% yield.
So how does oil work into this...?? Oil is used to manufacture & deliver just about every product in the world. So if a farmer has to pay more for oil/gas to harvest their crop that will force them to charge more for their product to offset the higher cost to them. Then the company that delivers the produce from that farmer to the store is paying more for oil which again adds another increase in that same product to offset their costs. This occurs for just about every product and as the consumer has to pay more for the goods they consume inflation moves up.
So you can see that the speculators of oil forcing the price per barrel to artificially move higher are actually going to eventually drive prices higher at your local store which will then drive mortgage rates higher as investors will not buy mortgage bonds or treasuries if they feel inflation will erode their returns.
So don't just get mad when you are at the gas station paying $4 a gallon gas. The speculators who are keeping the price of oil above what most economists say it should be are costing us a lot more than a higher cost at the gas station...they will ultimately cost us all a lot more for mortgage interest rates and all the good and services we consume on a daily basis.
What can you do? Contact your senator/representative and lets see if we can get something done to limit the type of investor who can speculate on Oil futures. I am a supporter of free markets, but the this case..there are too many unintended consequences that will negatively impact our economy and the recovery of our housing market to leave open to a Wall Street hot shot speculating with our future.
