Why Did Mortgage Rates Rise Over 1/2% Wednesday?

Conforming mortgage rates rose by 0.625 percent Wednesday. Yes, you read it right. Zero-point-six-two-five percent.

The surprise surge in pricing started shortly after 1:00 P.M. ET, then continued all the way until the market's closing. It was the sharpest one-day surge in mortgage rates in recent history.

For mortgage rate shoppers swept up in the surge, monthly payments are now higher by $29 per $100,000 borrowed.

That's a significant shift.

For as rare as Wednesday's events were, though, middle-of-the-day, 0.625 percent rate changes don't just happen. Yesterday, the action was the result of several factors, including:

•Rising oil prices and gas prices
•Optimistic predictions about the end of the recession
•Concerns over the U.S. total debt load
•Fears of inflation

In addition, momentum trading played a role.

As markets worsened, selling begat more selling, amplifying Wall Street's total losses. As mortgage bond prices fell, mortgage rates went up.

Mortgage markets are notoriously fickle and yesterday's events proved it. Days like Wednesday are precisely why insiders recommend shopping for mortgage rates in a compressed timeframe.

The faster you finish, the lower the risk of losing low interest rates to new market conditions.