I would ask first what the rate itself tells us, and what it does not. The article reports that the 10-year Treasury, the reference point that mortgage rates track, moved 20 basis points higher within a single week, landing at levels not seen in almost two decades, and that the average 30-year mortgage is now above 7%. A yield is a price for the use of money over time. It is not by itself a verdict on the borrower, the lender, or the economy. As I wrote, "something can everywhere be made by the use of money," and so "something ought everywhere to be paid for the use of it." The question is not whether the price rose, but what the rise is doing to the arrangement of lending.
I would distinguish the several uses to which borrowed money is put, for they do not bear the same interest equally well. When the legal or market rate is pushed high, the greater part of the money to be lent is drawn toward those who will pay most eagerly, and I observed that "prodigals and projectors" alone are willing to give such high interest, while "sober people, who will give for the use of money no more than a part of what they are likely to make by the use of it, would not venture into the competition." A mortgage is precisely the sort of sober use: the borrower expects the house and the household's income to carry the charge. If the charge rises faster than the income the house can be expected to yield, the sober borrower is the one who withdraws, and the capital is left to those who can afford to pay more for it. That is a change in the composition of lending, not merely a number on a screen.
The article says Fed officials describe growth as strong and the labor market as solid, and that the yield rise may reflect durable activity rather than distress. I would take that at its word and still note what it does not settle. A high rate of interest is consistent with vigorous borrowing and with the exclusion of moderate borrowers; the same price can carry both. What I would watch is whether the higher charge is being paid out of a genuine increase in what the borrowed stock can produce, or out of the borrower's existing revenue. The first sustains the loan; the second merely transfers it. The article does not tell us which is happening, and I would not pretend that it does.
