Mortgage rates have been fluctuating due to President Trump’s tariff proposals, causing uncertainty in the market. The economy could head towards a recession, inflation could rise, and sweeping tariffs could impact trading partners. This uncertainty has made mortgage rates directionless, leading the Federal Reserve to pause interest rate cuts until there are clear signs of an economic slowdown. With investors and lenders waiting for news on trade policies, more turbulence is expected in the coming months.
The direction of mortgage rates depends on the economic impact of policies and the Fed’s interest rate cuts. Market uncertainty over tariffs has caused disarray in the bond market, with daily swings in 10-year Treasury yields affecting mortgage rates. Trump’s inconsistent trade policies have created uncertainty, and greater clarity is needed for stability. Fed rate cuts may be necessary if economic growth slows, but inflation from tariffs could delay these cuts. The Fed indirectly influences mortgage rates, which are sensitive to fiscal policy and economic growth.
In the event of a recession, mortgage rates could drop as investors seek safer investments like US Treasury bonds. However, declining investor confidence in the US economy could disrupt this pattern. Concerns arise over foreign trading partners selling massive amounts of US Treasury debt, which could cause yields to rise steeply. Not even rate cuts by the central bank may be enough to lower yields or mortgage rates in such a scenario.
Prospective homebuyers may need to adjust to a “higher for longer” rate environment, with rates fluctuating between 5% and 7%. Even in a recession, getting mortgage rates below 3% may be unlikely without severe economic downturn. Building your credit score, saving for a larger down payment, shopping for mortgage lenders, and considering mortgage points are recommended steps to make buying a home more affordable in the current market. Cheaper mortgages as a result of a recession may not benefit households facing job losses and tighter budgets.
While market forces remain out of individuals’ control, taking proactive steps like improving credit score, saving for a larger down payment, and shopping for mortgage lenders can help make buying a home more affordable. Mortgage rates have been fluctuating due to uncertain economic conditions, the impact of tariffs, and Fed rate decisions. As the market continues to experience turbulence, prospective buyers should be prepared for higher mortgage rates and take steps to make their home purchase more financially feasible.
