Yesterday, I wrote about how the uncertainty surrounding tariffs was hurting mortgage rates.
In short, the market doesn’t know what to make of the tariffs given the constant flip-flopping going on.
One day the tariffs are on. The next day they’re off. Then they’re on again. Then there are new ones. Then they’re worldwide!
It’s getting old, and in the process other countries seem to be losing interest in doing business with the United States. Apparently, Canadians aren’t buying U.S.-made products now…
At the same time, the nice run mortgage rates enjoyed from mid-January to March seems to be over. And there’s now a real fear we could return to 7% mortgage rates.
Could Mortgage Rates Go Back to 7%, Again?!
In early March, I asked a seemingly straightforward question. Will mortgage rates go to 5.99% or 7% next?
This was when the 30-year fixed was hovering around 6.75%, but appeared to be on a clear downward trajectory.
It seemed like despite a 75-basis point drop needed, rates were indeed heading to sub-6% as opposed to 7%.
But basic math tells us it’s easier to move 25 bps than it is 75 bps, and now we’re knocking on 7’s door once again.
If you consider monthly payments, it’s not a huge difference. A $400,000 loan amount set at 6.75% is $2,594.39 per month.
It’s only about $67 more at a payment of $2,661.21 with an interest rate of 7%.
But it’s a massive psychological hit to cross the 7% threshold. And not just because it’s a threshold, but because it’s one we’ve crossed several times already.
It’s like paddling out into the ocean to catch a wave, and getting bombarded by wave after wave.
Once you think you’ve made it past the break, you come up for air and another wave pulls you under again.
It’s exhausting, it’s demoralizing, and eventually you might just want to throw in the towel and quit.
And perhaps that’s what some prospective home buyers are considering today. How much more can they really take?
How many more head fakes can they put up with when it comes to mortgage rates? They keep hearing that they’re going lower, only to see them bounce back.
Despite What You May Have Heard, Mortgage Rates Haven’t Really Gotten Anywhere Lately
If we consider Trump’s promise to lower mortgage rates, and the rhetoric now that they’ve accomplished that goal, it’s even worse.
When it comes down to it, the 30-year fixed has basically gone nowhere since mid-October.
Rates increased once Trump was the expected winner a few weeks before the election, then kept climbing once he won on his expected inflationary policies (see chart above).
Then they simply came back down once his appointed Treasury Secretary Scott Bessent calmed everyone’s nerves and said tariffs and the like wouldn’t be so bad.
He further soothed rattled investors (and home buyers) by repeating that the administration was committed to lowering interest rates.
But times have changed. Today, he was telling folks the White House is focused on the “real economy,” and not “a little bit of volatility” in the markets.
Problem is, the market seemed to be buying it before, but now their patience has run out.
The S&P 500 has entered correction territory, down 10% from the record high seen in February.
And the 30-year fixed is back to 6.78%, per MND’s daily index, which isn’t much progress (if at all) given the corresponding stock market selloff.
You’d expect interest rates to be a lot lower with stocks selling off so badly, as a flight to safety in bonds typically takes place.
Not so at the moment, with stocks and bonds selling off together. So prospective buyers feel poorer and rates aren’t any better. Great!
We Could Risk Missing Another Key Spring Home Buying Season
The big worry now, at least in my mind, is we could be jeopardizing yet another spring home buying season.
This is peak home buying and selling time, and the last thing we want is a spike in interest rates (again).
Last year, mortgage rates were at similar levels, then surged to 7.50% in April, which put a damper on home buying.
That took the wind out of the housing market’s sails and could happen again if the trade war business doesn’t come to an end.
The result then was the lowest existing home sales total since 1995, with just over four million sold in 2024.
If Trump keeps making new tariff threats, I can’t imagine mortgage rates seeing much improvement.
They might be stuck around current levels, or they could creep up again and breach 7%. In my opinion, that’d be a gut-punch for prospective home buyers.
Affordability is already terrible, and it risks getting worse. Meanwhile, pending home sales fell to another all-time low in January, per the National Association of Realtors.
And between rising layoffs, tariffs and trade wars, a plunging stock market, and just overall uncertainty, I can’t see a lot of buyers stepping up to the plate. Why would they?
If the administration doesn’t act fast to fix this, we could see another dismal year of home sales.
Before creating this site, I worked as an account executive for a wholesale mortgage lender in Los Angeles. My hands-on experience in the early 2000s inspired me to begin writing about mortgages 19 years ago to help prospective (and existing) home buyers better navigate the home loan process. Follow me on X for hot takes.