Mortgage rates had another moderately bad day to start the new week.  The unfortunate thing about moderately bad days that occur when rates were already at 14 year highs is that we’re left with another new 14-year high.

There were no new or interesting reasons for yester’s rate spike.  The bond market continues getting in position for this Wednesday’s policy announcement from the Fed.  Traders fear the Fed will–in a nutshell–do and say things that are not friendly for rates.  It’s not uncommon for the market to do this sort of defensive positioning in a very aggressive way before the event in question only to experience some relief shortly thereafter.

In this case, that relief actually does depend on the message delivered by the Fed.  Unlike some other pre-Fed rate spikes, this one isn’t obviously overdone.  Reason being, there’s a risk that the Fed takes this opportunity to really drive home the message that they will be relentless in the fight against inflation.  That’s the scenario that could actually see rates go even higher.

But we’ll cross that bridge if we come to it.  Yesterday’s bridges are unpleasant enough with the average lender somewhere in the vicinity of the mid 6% range depending on the pricing scenario.

NOTE: a rate quote is not necessarily what it may seem at first glance these days.  Upfront costs (“points”) can be required in many cases, simply to pay for fees that are normally covered by lender premiums.  Those premiums don’t exist in the same way they normally do.  The reason for this is a bit esoteric, but for those who want to try to understand, here you go:

Mortgage pricing is driven by what investors will pay. Investors typically are willing to pay a premium. In other words, they might front $310k on a $300k loan with the expectation to earn that $10k back over time. But in a high rate environment with a reasonable expectation for rates to fall in the future, they expect borrowers will refi ASAP, thus costing them that return over time. As such, they’re simply not paying up with the normal “premium pricing.” This means borrowers are forced to cover costs upfront that might otherwise be absorbed by that investor premium.