Mortgage rates surged higher today, moving easily to new 4-year highs.  Today's average conventional 30yr fixed rate is roughly one eighth of a percentage point higher than Wednesday of last week and more than half a point higher than the best rates seen in January.  A half point increase would cost roughly $90/mo in terms of monthly payments on a $300k loan.  In terms of actual "note rates" being quoted, 4.625% is now replacing 4.5% as the most prevalent quote on top tier scenarios.  That said, it's worth noting that there's a fair amount of variability from lender-to-lender and day-to-day at the moment.  This is typical for market conditions we're currently enduring.

As expected, today's specific culprit was the Consumer Price Index report (CPI).  This is the most important inflation report in the US and arguably the most important piece of economic data over the past 6-8 months.  While the mighty jobs report normally holds that title, there's nothing new or surprising about a strong labor market  at the moment.  A gradual rebound in inflation, on the other hand, would be much bigger news for the economy and the bond market (bonds dictate rates).

Inflation is one of rates' quintessential enemies.  Higher inflation means the payments investors receive from bonds will have less buying power in the future.  When this morning's data showed that inflation was picking up more quickly than expected, investors rushed to account for that decrease in value.  They accomplish this by selling more bonds than they buy, thus pushing the price of those bonds lower.  When bond prices move lower, rates move higher. 

While today is an unpleasant extension of a broader move higher, nothing has fundamentally changed about that broader trend.  Expect it to continue until and unless we have a significant push back in the other direction--and one that lasts for more than a few days.  Rest assured, I'll be the first to let you know when such a bounce begins to materialize.