It's usually a good idea to mix things up week to week; variety helps to hold one's interest. At times, though, the trend – when it's the lead story – simply can't be ignored.

Mortgage rates are the lead story, and they are the lead story because of the trend, which has been up, and up significantly.

When rates rise, they rise for everyone, even if not in equal proportion. That said, rates are at a 14-month high in many markets.

Last week, we offered an explanation for rising rates: “tapering” – the Federal Reserve reducing its monthly purchases of mortgage-backed securities (MBS) and U.S. Treasury notes and bonds. (Not coincidentally, the yield on the 10-year Treasury note, a proxy for the 30-year fixed-rate loan, is also at a 14-month high.) Lower demand on the Fed's part means the yield on these securities must rise to attract private buyers.

In addition, economic growth and job growth have picked up momentum, which also pressures rates to rise.

At this point, we don't expect to see a hard pull back in lending rates. But as we noted last week, the perception that the Fed is “tapering” might be overdone, so we wouldn't be surprised to see rates ease; just don't expect to see a return to the ultra-low rates that prevailed back in November.

The spike in mortgage rates has taken the steam out of refinance activity, and that's to put it mildly. Refinances have suffered four weeks of weekly doubled-digit declines. The latest reported weekly decline, based on MBA data, shows refinance applications were down 15%.

The sharp decline in refinances has caused some consternation, but it shouldn't be unexpected: Much like activity was pulled forward with federal housing tax credits a few years ago, refinance activity was pulled forward by the Federal Reserve's lowering of mortgage rates. The hard economic fact is that rates can go only so low; once the low is reached, refinances will slow.

Purchase activity, in contrast, is more resilient. Purchase applications were down only 2%. We weren't surprise to read a article that noted that rising rates were prompting buyers to scurry into action. We've frequently mentioned that rising rates (as long as they are accompanied with economic growth) would prompt more people to act. This appears to be occurring. Unfortunately, action for many is being thwarted by a dearth of housing inventory.

The bottom line is that we've been warning for most of 2013 that the risk in this market is in the waiting. Our opinion remains unchanged.

 Courtesy of Jessica Regan.

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