Without getting too much into the economic weeds, here are a few other reasons why the 10-year Treasury yield has gone up:
- The unwinding of Treasury carry trades
- Foreign central banks pulling back on US debt
- Concerns about weak Treasury auctions
- Hedge fund liquidations and tax-related selling
All these factors reduce demand for bonds and push yields higher. Because mortgage rates track those yields, they rise, too.
What’s the bigger picture behind tariffs?
Trump’s proposed tariff agenda targets countries that have large trade surpluses with the US, aiming to reshore jobs, generate revenue and lower interest rates by triggering a recession.
But reshoring is difficult without a large, skilled domestic labor pool willing to take lower-wage jobs. Tariffs can also backfire by raising consumer prices and inviting foreign retaliation. So far, the tariff threats have raised yields instead of lowering them, undermining the goal of cheaper debt.
Moreover, China isn’t likely to back down. It has lower labor costs, control over essential rare earth materials and lithium, and has major economic dependency on exports to the US. A prolonged trade war would hurt both sides and the global economy along with it.
How will tariffs affect mortgage rates and housing?
Foreign central banks hold roughly 31% of US debt. If countries like Japan, China or the UK reduce their bond purchases, that would push Treasury yields — and mortgage rates — even higher. Higher rates reduce home affordability, slow buyer demand and tighten credit conditions, even if construction material costs remain stable.
Tariffs are throwing a wrench into the bond market and mortgage rates are along for the ride. This isn’t just about trade policy. It’s about how uncertainty, inflation fears and reduced demand for US debt are putting upward pressure on borrowing costs across the board.
Since early March, average mortgage rates have fluctuated between 6.5% and 7%, which could be the range they’ll remain throughout much of 2025.
Is it smart to buy a home now?
If you’re closing on a home soon, consider locking your rate. Market sentiment is fragile, and volatility can wipe out rate improvements overnight. Floating only makes sense if you understand the risks and have flexibility on your timeline.
If you’re just starting to navigate the housing market right now, stay focused on facts, not fear — and make a plan based on what financially makes sense for you.
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