For a moment, it looked like the tariff-driven stock market crash would have a silver lining for anxious homebuyers: Their stock portfolios may be decimated, but at least mortgage rates would fall.
Although mortgage rates did drop on Friday, that hope turned out to be short-lived. Treasury yields and mortgage rates skyrocketed higher on Monday and continued to climb Tuesday. Average 30-year mortgage rates swung nearly 30 basis points over the course of the day to 6.82%, according to Mortgage News Daily, mirroring an uptick in 10-year Treasury yields, which rose 19 basis points to 4.18%.
Amid lingering uncertainty about President Trump’s sweeping package of global tariffs and their effects on the economy, whipsawing mortgage rates are likely to be the new normal, according to housing market experts.
“It’s going to be volatile,” said Chen Zhao, who leads Redfin’s economics team.
Mortgage rates are moving higher now precisely because of their close relationship with 10-year Treasury yields. Those yields continued to climb modestly on Tuesday morning, completely wiping out their decline. Mortgage rates inched up too, averaging 6.85% by midday Tuesday.
The sudden reversal in yields likely signals that the market is no longer only worried about a recession that would force the Federal Reserve to cut interest rates, Zhao said. It’s also beginning to price in stagflation, the potent combination of inflation and a weakening economy that can be particularly hard for central banks to address with monetary policy.
Dig deeper: What is stagflation?
All of this isn’t what the Trump administration, whose officials have been vocal about demanding lower interest rates, wanted. Trump has repeatedly urged the Fed to cut rates in recent days, but Fed Chairman Jerome Powell has said that the central bank isn’t in a hurry to cut due to economic uncertainties.
Though the Fed doesn’t have direct control over mortgage rates, rates do move based on expectations about the future direction of monetary policy.
On Monday, Philip Bennett, president of Miami-based mortgage broker Bennett Capital Partners, started his day excited for another move lower in Treasury yields, and had been fielding calls from past clients who were eager to refinance. Then rates moved sharply higher.
“It’s kind of a head-scratcher right now, to be frank,” Bennett said.
Still, he’s been eyeing falling commodity prices as a sign that inflation won’t be a major concern and expects worsening unemployment may eventually pull rates lower. If that happens, he expects buyers and refinancers to rush back.
