Falling mortgage rates offer a bright spot amid tariff chaos — but the trade war creates new hazards
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- The 30-year mortgage rate dropped to its lowest point since October amid the week's trade war chaos.
- This might not last long if tariffs revive inflation, pushing rates back up.
- Tariffs could also weaken buyer sentiment and raise new home costs by as much as $9,200.
President Donald Trump's latest tariff salvo has wreaked havoc on markets, but there's a may be a silver lining for homebuyers: falling borrowing costs.
Mortgage rates fell to a six-month low on Friday, lowering one of the biggest barriers for US housing shoppers.
According to data from Mortgage News Daily, the 30-year fixed rate dropped from 6.75% to 6.55% between Wednesday and Friday, hitting the lowest level since October.
Trump's harsher-than-expected tariffs prompted investors to seek refuge among safe-haven Treasury bonds this week, driving yields down. Mortgage rates closely track long-dated bond yields. As it stands, the benchmark 10-year Treasury yield dropped below 4% for the first time since October on Friday, helping to ease the
The respite will be brief
Initially, this should seem like welcome news for buyers navigating a historically unaffordable housing market. Elevated rates have kept current homeowners from selling, reducing market inventory and boosting home prices. In 2025, this has translated into a housing cooldown, with transaction activity slowing to a crawl.
It's logical to expect falling rates to revive demand, but to some analysts, this could be a short-lived window. That's if tariffs disrupt supply chains and boost inflation, which would prompt interest rates — and, consequently, bond yields — to stay up.
"Mortgage rates are going down at the moment. However, when the higher costs of goods start to push up the inflation rate, it is quite possible that rates will go back up. I expect to be on a mortgage rate roller coaster for the next few months," Melissa Cohn, regional vice president of William Raveis Mortgage, said.
That's because tariffs could raise inflation and keep expectations for interest rates high, in turn, keeping bond yields high. The push and pull between inflation forecasts and growth fears could keep bond yields stuck in a narrow range, keeping a floor under mortgage rates.
The trade war is a hazard for buyers
Though purchase applications jumped to their highest level in nearly two months just ahead of the tariff announcement, analysts suggest the trade war could exacerbate market headwinds.
Recent duties are expected to increase the average cost of a home by $9,200, according to the latest National Association of Home Builders survey. An estimated 7.3% of goods required in residential construction were imported into the US in 2024.
At the same time, tariffs may pull back consumer appetite, keeping buyers out of the market. Home price growth would cool moderately, and Goldman revised its full-year appreciation outlook down to 3.2%.
"First, the labor market will likely cool, and our US economists recently raised their base case forecast for year-end unemployment rate to 4.5% vs. 4.0% to start the year. In an environment of high debt-to-income ratios on new origination, a marginal drop in employment or income growth could materially weigh on demand," analysts wrote.