Seemingly overnight, the mortgage rate narrative has changed rather drastically, at least in relative terms. While rates had risen gradually from near-all-time lows in August, they were still in a historically low range by the end of December. A week later and we’re at the highest levels in 2 years . There are all kinds of ways to quantify the movement, but a chart provides the clearest picture. In other words, rates weren’t ridiculously far from longer-term highs even before this week. It’s just a bit of a surprise to see how quickly they closed that gap. So WHY did it happen? Rates are based primarily on the bond market and bonds have several concerns at the moment. The biggest general concern is the shift in the narrative surrounding covid and the omicron variant. Traders were already prepared for a big uptick in covid case counts based on the omicron surge in other countries and subsequently in certain parts of the US in December, but they’re also cognizant of the possibility that omicron may not impact the economy in the same way as the delta variant. At the same time, there’s speculation that record-setting cases counts could hasten covid’s endemic status much earlier than previously expected. Bonds feed on fear, turmoil, and risk aversion. If the pandemic outlook might be improving, the net effect is upward pressure on rates, all other things being equal. Whether they’re right or wrong, traders are looking past what may be a challenging January in terms of covid and forward to a more economically palatable phase of the pandemic. At the very least, they’re positioning for the possibility, and in this case, that means higher rates.