With another chaotic week ahead, mortgage market watchers are keeping a keen eye on proceedings
A war of words between the Trump administration and the Federal Reserve is rumbling on, with leading government figures calling for Jerome Powell’s resignation as the Fed chair continues to make the case for the central bank’s current pause on interest rates.
Meanwhile, there’s little sign of a resolution in store in the tariff war between the US and major trading partners. This week, the Trump administration extended a pause on tariffs to next month even while reportedly issuing letters detailing new levies on some trading allies.
The outlook for mortgage rates amid that whirlwind is unclear. Last week, Powell said the central bank would have reduced rates this year if not for Trump’s trade policies.
The Fed has held interest rates steady at 4.25% to 4.5% since December, while mortgage rates have continued to hover well above 6% throughout most of this year. With the federal funds rate influencing borrowing costs, mortgage rates have stayed elevated as trade uncertainty persists.
Trump has shown no willingness to back down in what’s become a signature policy since his return to power in Washington. “Tariffs are clearly one of his favorite tools in the toolbox,” Mark Hamrick, senior economic analyst at Bankrate, told CNBCv, explaining how trade policy has become intertwined with monetary policy decisions.
Treasury yields rise on trade tensions
The 10-year Treasury yield, a key indicator of where mortgage rates are headed, rose Monday as investors monitored trade tensions amid Trump’s extension of the 90-day tariff reprieve deadline. The benchmark 10-year yield was up 5 basis points to 4.387%, while the 30-year bond yield climbed nearly 7 basis points to 4.921%.
The 2-year Treasury yield added 2 basis points to 3.899%. One basis point equals 0.01%, with yields and prices moving in opposite directions.
Another week of tariff threats ahead
Trump’s Monday announcement that 14 countries face tariffs of at least 25% starting August 1 has mortgage industry analysts bracing for continued market instability. The White House extended its initial tariff pause while sending new threat letters to Japan, South Korea, and 12 other nations.
Both Japan and South Korea, representing about 4% of US imports each, face 25% tariffs, while Thailand would see 36% rates and Bangladesh 35%, according to a report from The New York Times. Additional countries are expected to receive similar notices throughout the week.
The US administration’s “90 deals in 90 days” campaign has made minimal progress, with Wednesday’s deadline forcing Trump to extend negotiations while maintaining tariff pressure on trading partners.
Economic experts warn of housing market impact
Economists have grown increasingly concerned about the prolonged trade conflict’s effect on the housing sector. A recent survey found 78% of respondents believe Trump’s tariffs will make it harder to manage debt, including mortgages.
According to Budget Lab at Yale University, tariffs could cost households an average $2,000 in 2025, reducing disposable income available for housing payments. The analysis reflects tariffs in place as of June 16th.
“Put yourself in the best possible situation by building your emergency savings and knocking down that high-interest debt,” advised Matt Schulz, chief credit analyst at LendingTree.
To what extent do you believe the tariffs will impact the housing market? Share your insights in the comments below.
