Mortgage rates rose sharply over the last seven days as a result of a surprising new policy making refinance loans more expensive.

Despite seeing some substantial changes in the past six months, most of the key data released during the pandemic has not caught mortgage lenders by surprise. The announcement by the FHFA to apply a 0.5% fee to all mortgage refinance loans was one that caught lenders off guard, placing many in a difficult financial spot and forcing them to raise rates across the board – even for purchase loans, which aren’t directly affected by the new policy – in order to cover their losses. For the last few months, mortgage rates have moved as a result of key data (which have shown sharp deteriorations and subsequent quick, partial rebounds), but much of the time, the impact of any given release had already been priced into rates. This week, decently strong inflation and jobless claims helped keep Treasury yields afloat, limiting the downward pressure on rates.

The path for rates in the near future will continue to be dictated by key data, as well as coronavirus-related developments — but last week’s refinance fee announcement lifted the baseline level from which rates will move.