As stock markets tumbled and economists warned of a potential recession following this week’s rollout of new massive tariffs by President Donald Trump, some Americans are wondering if there could be a silver lining: lower mortgage rates.
- The average 30-year fixed-rate mortgage, at 6.82% a year ago, was 6.6% on Thursday, according to the national mortgage giant Freddie Mac.
- Will Tariffs Affect Mortgage Rates?
- While the tariffs won’t “directly affect” rates, Cain said, economic volatility likely will.
- Will Tariffs Affect Home Costs?
- What Should Homeowners Do?
- What About Renters?
Trump announced the largest tariff increase in United States history, a move he claims will revitalize domestic manufacturing and amount to an “Economic Declaration of Independence.” His order imposes a new 10% tariff on all imported goods and higher import taxes tailored to about 60 countries.
Mortgage loan rates, meanwhile, have dipped slightly in recent years, and many are watching to see if they will continue to fall.
The average 30-year fixed-rate mortgage, at 6.82% a year ago, was 6.6% on Thursday, according to the national mortgage giant Freddie Mac.
But mortgage rates aren’t the only factor governing the housing market. With housing costs at record highs and economic uncertainty reigning in Washington, experts say there may not be much relief for prospective homebuyers.
Will Tariffs Affect Mortgage Rates?
It’s not entirely clear how the tariffs will affect long-term loan interest rates, experts told The Washington Post. The new policy has created significant economic uncertainty, which will likely impact the housing market in multiple ways.
“Mortgage rates are currently lower than they were, and they’re at the lowest point this year,” said John Cain, director of secondary marketing at KeyBank. “But as for rates dropping substantially, it’s too soon to tell.”
While the tariffs won’t “directly affect” rates, Cain said, economic volatility likely will.
The nation began seeing that this week, said Greg McBride, chief financial analyst at Bankrate.com. Economic uncertainty led many investors to invest in bonds, lowering the yield they could expect. “That pushed mortgage rates down and many other interest rates as well,” McBride said.
But the overall economic outlook remains a hurdle for most prospective homeowners. “If people are worried about their job, or their own personal economy,” McBride said, “it’s not the environment where one wants to take the plunge and buy a house.”
In short: “If the economy stinks, nobody wants to buy a house.” And with household budgets stretched thin, that could make getting a mortgage harder. People may carry more debt and have less savings.
What happens with mortgage rates will also depend on what the federal government decides to do next: fight inflation by keeping interest rates high, or combat unemployment by lowering rates, said Chen Zhao, who leads economic research at real estate company Redfin.
“Rates could drop a lot, they could rise, they could stay flat,” she said. “It’s very, very uncertain… it’s very possible that instead, what we’ll see is rates will be very volatile.”
There are other factors too, Cain said—like the reaction from other countries and how long the tariffs stay in place. “We haven’t done this before, not in my lifetime, certainly not in most people’s lifetimes,” he said. “I don’t think the final impact is known.”
Will Tariffs Affect Home Costs?
The tariffs will drive up construction costs, meaning new homes will cost more.
The National Association of Home Builders estimates that about 7% of the material used in new home construction last year came from a foreign country. A large portion of those materials comes from China, which was hit with a 34% tariff, according to Jim Tobin, the association’s CEO. The list of China-made home-related products is long: electronic ceiling fans, lamps, hinges, nails, and more.
“We expect these tariffs to have a widespread impact,” Tobin said. Early estimates, he added, suggest the cost of a new home will rise by $7,500 to $10,000. McBride added that fewer homes may be built, which would drive up prices.
What Should Homeowners Do?
Homeowners who took out a mortgage in the last two and a half to three years should consider refinancing, McBride said, adding that reducing a monthly payment will be particularly impactful now, as the cost of living is expected to rise.
If you were planning to sell, now is as good a time as any, said Matt Feris, an agent at Redfin. “You really can’t time the housing market any more than you can time the stock market,” Feris said, though he added that spring is always the best season to sell, and the housing market has been more active this year than usual.
The same logic applies to buyers: if you find the right home and can afford it, buy it.
“It’s more important than ever to make sure you get good advice and set the right price in this market,” said Danielle Hale, chief economist at Realtor.com. Those waiting to make home improvements before listing should also be aware that it could take longer and cost more this year, as housing professionals react to the tariffs, she added. “But if now is the time for you to make a change in your housing situation,” she said, “you absolutely can.”
What About Renters?
The tariffs could indirectly affect rental prices. Rising insurance costs could lead to higher rents, and increased property taxes could mean the same if the tariffs impact state and local budgets, McBride said.
“It’s not something that will happen overnight, but there could be some impact,” he said.
Image: Infobae
