Mortgage Rates Surge Despite Pause on Tariffs: Will They Go Down?

Are you trying to buy a home and feeling like you're on a rollercoaster? Well, you're not alone. Even with the delay of some tariffs, mortgage rates have surprisingly increased. Average 30-year mortgage rates currently stand at 6.92%, according to Mortgage News Daily and 6.84% by Zillow. Let’s dive into why this is happening and what it means for you.

Mortgage Rates Surge Despite Pause on Tariffs: Will They Go Down?

Why Are Mortgage Rates Rising?

It's a confusing time for the market, and I understand why you might be scratching your head. The delay of tariffs should, in theory, calm things down, right? Unfortunately, the financial world isn't always that straightforward. Several factors are pushing mortgage rates upward despite the tariff reprieve:

• Inflation Fears: The initial announcement of tariffs triggered fears of inflation. The market worried that tariffs would increase the cost of goods, leading to higher prices and a weaker economy. While the tariff delay offered some relief, these inflationary concerns haven't entirely disappeared, continuing to put upward pressure on interest rates. The prospect of stagflation – a combination of inflation and a weakening economy, has further complicated matters.
• Bond Market Volatility: Mortgage rates closely follow the 10-year Treasury yield. This week, these yields swung wildly, initially dropping due to recession fears but then surging upwards as stagflation concerns took hold. This volatility directly translates to instability in mortgage rates.
• Uncertainty Rules the Day: The economic situation is constantly changing, making it difficult to predict where rates will go. This uncertainty makes investors nervous, and their reactions can cause rates to fluctuate unpredictably.

The Tariff Rollercoaster and Its Impact

Let's recap how the tariff situation has played out and its impact on the mortgage market:

1. Tariff Announcement: President Trump's initial tariff plans sparked fears of inflation and a potential recession.
2. Initial Reaction: Rates Dip: Treasury yields fell as investors sought safety, causing mortgage rates to dip briefly.
3. Reality Bites: Rates Surge: The market quickly reversed course, with Treasury yields and mortgage rates climbing as concerns about stagflation grew.
4. Tariff Delay: Limited Relief: The delay of some tariffs provided a temporary pause, but rates remain elevated due to lingering uncertainty.

The following table summarises these points

Event	Impact on Treasury Yields	Impact on Mortgage Rates	Reason
Tariff Announcement	Initial Drop	Initial Drop	Recession fears, flight to safety
Market Reversal	Sharp Increase	Sharp Increase	Stagflation concerns, inflation fears
Delay of Some Tariffs	Slight Decrease	Still Elevated	Lingering uncertainty, pre-existing inflationary pressures, volatile bond market

What Does This Mean for You?

So, you're probably wondering how all this affects your home-buying or refinancing plans. Here's my take, based on what I am seeing in the market:

• Lock in a Rate if You're Comfortable: If you find a mortgage rate that fits your budget, consider locking it in, even if it's not the lowest rate you've seen. As Tim Stafford, a mortgage broker at Edge Home Finance, advises, “If it works for you now, I would lock.” The market is simply too unpredictable to wait for the perfect moment.
• Don't Panic: While rising rates are concerning, don't let them completely derail your plans. Remember that rates fluctuate, and they could come down again in the future.
• Consider an Adjustable-Rate Mortgage (ARM): If you're comfortable with some risk, an ARM might be an option. These loans typically have lower initial interest rates than fixed-rate mortgages, but the rate can adjust over time.
• Shop Around: Don't settle for the first rate you see. Get quotes from multiple lenders to ensure you're getting the best possible deal.
• Focus on the Long Term: Buying a home is a long-term investment. Don't let short-term rate fluctuations scare you away from your dream.

Looking Ahead

Predicting the future is impossible, but here are some factors I'll be watching closely that could influence mortgage rates in the coming weeks and months:

• Inflation Data: Keep an eye on inflation reports. If inflation remains high, rates are likely to continue rising.
• Federal Reserve Actions: The Fed's decisions on interest rates will have a significant impact on mortgage rates.
• Geopolitical Events: Global events, such as trade disputes or political instability, can create market uncertainty and affect rates.

Mortgage Applications See a Jump

Interestingly, mortgage applications jumped last week, with applications to purchase a home rising 9% and refinancing applications surging 35%, according to the Mortgage Bankers Association. This suggests that some buyers and refinancers took advantage of the brief dip in rates, even amidst the volatility.

My Final Thoughts

Navigating the mortgage market right now is tricky. I believe a wait-and-see approach is best for me at this moment. Stay informed, seek expert advice, and make decisions that align with your financial goals and risk tolerance. While I hope for lower rates in the long run, the short-term remains uncertain. It's essential to be prepared for continued volatility and to act decisively when you find a rate that works for you.