The Oil-to-Mortgage-Rates Chain Reaction

When energy costs increase, there are two ways it can knock the economy out of equlibrium:

1. Businesses cut back on spending, creating a recessionary ripple effect
2. Business pass on higher costs to consumers, creating an inflationary ripple effect

But when energy costs increase rapidly, the ripples can make like a splash, sinking the mortgage market along with the entire economic ship and when the mortgage market fails, prices drop and rates go up. 

In part from this week's rally to $135 per barrel, oil prices are now up 50 percent since February.  It's one reason why mortgage rates spiked this week.