Mortgage Rates Slingshot Higher as Tariff Uncertainty Roils Markets
April 8, 2025, 12:29 PM PDT — Mortgage rates surged Tuesday, climbing 25 basis points in the past 24 hours to an average of 6.85% for a 30-year fixed loan, erasing last week’s declines and signaling fresh volatility in the U.S. housing market. The spike, reported by Mortgage News Daily, comes as President Donald Trump’s tariff policies—escalating to 50% on 57 nations effective April 9 and a 10% baseline on all imports—send shockwaves through financial markets, stoking fears of inflation and economic stagnation.
The catalyst? Trump’s trade war redux. After announcing the sweeping duties on April 2, markets have whipsawed, with the S&P 500 shedding $5 trillion and the 10-year Treasury yield jumping from 4.03% last Friday to 4.31% by midday Tuesday, per real-time data. Mortgage rates, which loosely track Treasury yields, followed suit—undoing a brief dip to 6.63% late last week when investors flocked to bonds amid initial tariff panic. “Last week’s drop was a knee-jerk reaction pricing in dire expectations,” said Matthew Graham, COO of Mortgage News Daily. “Now, bonds are less spooked as tariff talks hint at negotiation, but inflation fears are taking over.”
Federal Reserve Chair Jerome Powell, speaking Monday, warned that tariff-driven price hikes could force tighter policy, a sentiment echoed by Treasury Secretary Scott Bessent’s Tuesday Fox News quip calling tariffs a “melting ice cube”—suggesting flexibility but not quelling market jitters. Posts on X capture the unease: “Mortgage rates spike to 6.85% on trade war inflation fears—stagflation’s here,” one user wrote, reflecting sentiment that rates could climb further if inflation outpaces growth.
The housing market, already strained by high prices (a median $398,400 for existing homes, per NAR), feels the pinch. Pending home sales hit a record low in January, and Tuesday’s rate jump threatens to deter spring buyers despite a growing supply of listings. “Buyers care about payments, not just home costs,” an X user noted, pointing out that every 1% rate hike slashes affordability by roughly 10%. Builders face added woes—tariffs could lift new-home costs by $9,200, per the National Association of Home Builders, clouding hopes of a construction boost.
Volatility’s the word. If Thursday’s Consumer Price Index or Friday’s Producer Price Index shows tariff-fueled inflation, rates could slingshot higher still. Yet if Trump’s maximum tariffs soften through deals—as Bessent hints—markets might exhale, pulling yields and rates back. For now, with Bitcoin below $75,000 and global trade partners like China retaliating with 34% duties, the uncertainty roiling markets keeps mortgage rates on a razor’s edge—bad news for homebuyers, and a test for Trump’s economic gamble.
