The mortgage rate whirlwind continues as we start another week.
This time, rates are back below 7% (just barely), though it’s little consolation considering where they were just 10 days ago.
If you recall, the 30-year fixed was close to 6.5%, which felt pretty decent at the time, especially since we had what felt like solid downward momentum.
Today feels like a little bit of a relief rally, but it’s still a one step forward, two steps back situation.
And given the uncertainty that remains, I wouldn’t bank on rates getting much better anytime soon.
Mortgage Rates Take the Elevator Up and the Stairs Down
Someone said something recently about mortgage rates taking an elevator on the way up and stairs on the way down.
It’s an analogy akin to what I always say about rates – that lenders take a long time lowering them, and waste no time raising them. The chart above from MND illustrates this.
In other words, they’re happy to reduce (their own) risk by raising rates, but very hesitant about taking on more risk by lowering them.
Simply put, it’s not in their best interest to take a chance on rates, especially in today’s environment.
They don’t want to lower rates only to see breaking news about new tariffs or some other development related to trade that sends them flying again.
So they price rates conservatively and anyone who needs a home loan has to pay a premium.
This is one explanation why mortgage rate spreads have widened again and are now closer to 260 basis points (bps).
The investors of mortgage-backed securities (MBS) demand a higher premium for the risk of investing in mortgages right now. And who could blame them?
It’s anyone’s guess what will happen next, but chances are there’s a greater likelihood rates go up rather than go down.
Even if they do come down, they’ll probably methodically fall as opposed to enjoying some big rally.
Conversely, it might not take much for them to rise back above 7% again if President Trump changes his mind on tariffs again, which history tells us is likely.
What Drove Mortgage Rates Lower Today?
The latest bit of good news for mortgage rates was a reprieve in tariffs on computers, smartphones, and other electronic devices.
That allowed 10-year bond yields to take a breather after rising from sub-4% levels early last week to as high as 4.60% before settling in around 4.35% today.
For the record, that move in yields was reportedly one of the largest two-day increases on record.
Not great if you’re attempting to bring down mortgage rates, which was a stated policy goal of this administration.
It came on the heels of the 90-day delay on reciprocal tariffs for global trade partners, so a couple of positive developments for yields after a very rough week.
However, the move lower is precarious because Trump said the exemption on tariffs for such categories was temporary.
And will only be put in place to allow time for U.S. companies to move production domestically.
Of course, who knows what later today will bring? Or tomorrow? It’s constant flux and nothing is remotely close to certain.
That very uncertainty is what I’m talking about when I say mortgage rates will have a tough time seeing any sizable moves lower.
Fed Rate Cuts Are Expected Either Way
Despite all the tariff flip-flopping, Federal Reserve Governor Christopher Waller said he expects the Fed to cut rates later this year.
He referred to Trump’s tariffs as “transitory” with regard to inflation, with a “smaller-tariff scenario” resulting in inflation of 3%.
And a larger tariff situation resulting in 4% to 5% inflation that “would ebb as growth slowed and unemployment increased.”
In either scenario, he believes the Fed will cut its own fed funds rate “with timing being the only question.”
The way it breaks down is bigger tariffs might require a relief cut (presumably earlier) while smaller ones would get a “good news” cut later in 2025.
There’s also been talk about Quantitative Easing (QE) making a comeback, where the Fed steps in as a buyer of Treasuries and possibly even mortgage-backed securities (MBS).
But that would likely only happen if things got really ugly on the trade war front.
In any case, it does appear that interest rates are going to ease at some point this year, though it might just happen in the second half of 2025.
Mortgage rates were on a roll in early April, but have now been derailed, possibly for all of the spring home buying season.
Not great for home sellers (or buyers), but the 2025 mortgage rate predictions might still come to fruition if the third and fourth quarter see less volatility.
Until then, it’s hard to get too excited about mortgage rates, but you never know. They often surprise us when nobody is expecting it.
Read on: How to track mortgage rates using bond yields and MBS prices.
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.