The effects of Trump’s trade policies on mortgage rates

What goes up must come down, right? When it comes to mortgage rates, nobody feels so sure anymore.

Over the past couple decades, the typical up-and-down cycle of mortgage rates has experienced a variety of disruptions: the Great Recession, the Covid-19 pandemic, and the highest inflation in a generation, for example.

Now, President Trump’s tariffs have renewed uncertainty about mortgage markets.

What does all this mean for your home buying or refinancing plans?

The initial reaction: Why mortgage rates rose despite tariff delays

A tapestry of global economic forces helps set the mortgage rate when you buy a home or refinance an existing home loan. When one of these economic forces changes, the others typically react, and average mortgage rates shift one way or the other.

For example, when President Trump rolled out his array of global tariffs this spring, stock prices across the world spiraled. This volatility drove stock investors toward the safer bond markets, raising the price for bonds such as the 10-year Treasury note.

Typically, more demand for 10-year T-notes heralds a decrease in mortgage rates.

But not always. Following the tariff announcement in early April, mortgage rates dropped, at first. Then, about a week later, rates surged again. Then, when the president delayed many of the tariffs, mortgage rates stayed about the same for another week or so before gradually starting to inch downward.

This unusual rate behavior is due, largely, to the sense of uncertainty in global markets. Investors who anticipate more uncertainty don’t make as many long-term commitments, even to bonds and mortgage-backed securities.

Uncertainty doesn’t stop home buyers or lenders

When these economic forces start to shift, news sites will post headlines about upended markets and fluctuating mortgage rates. This volatility affects demand for new mortgages, especially refinances.

But for homebuyers who need a new home loan, these headlines read like a mere abstraction. These homebuyers usually have real-life needs: They’ve outgrown their current home and need a new one. Or they’ve gotten a job in a new city and must move.

These homebuyers know the Federal Reserve and Trump’s trade policies set the context for their new home loan’s rate, but they’re more interested in what they can control: finding a house they can afford and working with a lender like Better that offers competitive rates within the context of market conditions.

Understanding the role of Treasury yields in rate volatility

That said, some people can wait until mortgage rates fall before selling or buying. Refinancers, especially, can control when they open a new mortgage since they already own their home and can keep using their existing home loan.

These types of borrowers like to watch Freddie Mac’s average mortgage rate chart. They also like to track the Fed’s actions on benchmark interest rates. But they should also keep an eye on 10-year Treasury yields. These yields tend to predict mortgage rates.

Falling yields on 10-year Treasury notes, in particular, often anticipate a decrease in mortgage interest rates. The 10-year T-note anticipates today’s mortgage rates because most home buyers sell or refinance their homes within 10 years, making the 10-notes and mortgage-backed securities a comparable investment.

Mortgage rate barometers can’t see all

10-year T-note yields offer a barometer for future interest rates, but this tool isn’t foolproof. For example, earlier this year, after Trump’s tariff announcement sparked a dramatic stock sell-off, bond prices didn’t increase as much as historic norms might suggest.

This was likely because tariffs sparked the economic turmoil. Tariffs tend to cause inflation, and inflation erodes the value of the dollar which is the foundation of bond markets. Plus, economists worry inflation sparked by Trump’s tariffs will make other home buying costs more expensive.

Every financial storm is a little different, and nobody, not even Freddie Mac, the Fed, or President Trump can predict with certainty how the economy in general, and mortgage interest rates in particular, will react to tariffs once they’re fully in effect.

Mixed signals: When tariffs both helped and hurt the housing market

What has made this year more unusual is the tension pushing on the housing market from different directions.

The traditional economic cycle says shaky stock markets lead to lower mortgage costs, increasing demand for homes. More demand for homes encourages more home building to meet the demand, increasing economic activity which, in turn, helps buoy shaky stock markets.

This is one way the Fed uses interest rates to cool a hot economy or spur growth during a recession.

But the ripple effects from new tariffs could be skewing the current economic cycle by increasing housing affordability in other ways — by increasing the costs for building supplies, furniture, appliances, and other products required for new homes.

In other words, homebuyers who typically might be encouraged by lower mortgage rates could also be discouraged by the higher costs required to move in and set up the home. Borrowers with plans to build a new home will typically feel the most financial strain from inflation.

How consumers and lenders are reacting

You can see this tug-of-war between interest rates and inflation playing out in the number of new mortgage applications lenders saw in April. The Mortgage Bankers Association reports a decline in applications for new loans during April of 2025, despite the slow decline in average mortgage rates during the second half of the month.

Lenders still saw more refinance applications in April of 2025 when compared to a year earlier, when refinance rates were above 7 percent, so it’s clear that borrowers still respond to lower rates.

Refinancing homeowners probably aren’t as likely to be shopping for new appliances or furniture, so they’re looking only at mortgage rates and fees — and not so much at inflation -– when deciding whether to apply for a new mortgage loan.

What does this mean for the mortgage industry?

Trump-era mortgage rate fluctuations haven’t shaken the solidity of the mortgage industry.

Mortgage lenders have weathered worse, like the early 1980s, when interest rates were nearly three times higher than today’s rates. And more recently, lenders survived about a year and a half of intense demand when, in the early 2020s, the lowest rates in history uncorked unprecedented levels of refinances and new loans.

Considering those two extremes, today’s rate volatility is happening within a smaller context.

The lending industry also benefits from its direct connection to the housing market which, historically, is a stabilizing force in the broader economy. Even when home prices fall, as they did during the Great Recession a decade and a half ago, they eventually recover.

Real estate is a long-term investment. Inflation or interest-rate shifts change housing affordability, but these forces don’t change the stability of the investment.

Better offers an anchor in economic uncertainty

The 2020s have taught us the futility of predicting next year’s, or next month’s, mortgage rates. Economists and mortgage industry analysts can make educated guesses, but they can’t make guarantees.

In this volatile rate climate where rates could surge any day, borrowers should focus on what they can control, like learning as much as they can about their lender’s upfront fees and customer policies.

That’s one reason Better specializes in transparency throughout the mortgage application process, from pre-approval to Closing Disclosure to the loan’s payoff.

We want our borrowers to understand how factors they can influence, like their credit history, income, loan type, and down payment or equity, impact the rate they lock in any economic atmosphere. This kind of knowledge helps homebuyers find their best deal.

Now with Better’s tech-driven mortgage application process borrowers can lock in their rates faster to capitalize faster when rates fall.

Start the process with your pre-approval here.