Weekly Mortgage Rates Stable But Could Be Poised to Fall

An eventful week capped off by President Trump announcing 10% tariffs on all imports saw mortgage interest rates react with a yawn. The average rate on the 30-year fixed-rate mortgage dropped one basis point to 6.76% the week ending Apr. 3, according to rates provided to NerdWallet by Zillow. A basis point is one one-hundredth of a percentage point.

Despite this tepid first take, the tariff news could have major implications for mortgage rates. Here’s why.

Tariffs won’t directly change mortgage interest rates, but they may have set off a chain reaction that could lead to lower rates. In the wake of the announcement, investors are clamoring for bonds. With stocks tumbling, bonds’ guaranteed rate of return makes them a safer bet.

Investors’ sudden taste for bonds has already driven down Treasury bond yields. When demand is high, bond issuers can offer lower yields knowing investors will still buy. Mortgage interest rates are highly correlated to 10-year Treasury bonds, because that’s about how long mortgages tend to last. (Even if most home loans have 30-year terms, homeowners’ average tenure is less than 12 years, according to U.S. Census data analyzed by Redfin. Fun fact, back in 2005, it was under seven.)

Additionally, mortgage-backed securities — bond-like investments made from bundled home loans — attract similar investors to Treasury bonds. That’s another reason mortgage interest rates tend to follow bond yields.

As Treasury yields fall, mortgage interest rates should go down, too.

While the immediate impacts are pretty straightforward, some of the longer term effects are murkier. That’s especially true if you’re trying to guess how the Federal Reserve, which aims to keep the U.S. economy humming along smoothly, might react.

The Fed would be more likely to consider cutting rates if data suggests an economic downturn. Investors seem to feel that’s increasingly likely.

Even before the latest tariff announcements, on Monday financial services firm J.P. Morgan raised its odds of a 2025 global recession from 30% to 40%.

Once the tariff news hit, the projected probability of a rate cut from the Federal Reserve increased, too. Before the tariff announcement, only about 10% of traders anticipated a rate cut at the central bankers’ next meeting in May. After, that number jumped to almost 25%.

One reason why the majority still don’t expect a rate cut? Tariffs will likely bring higher prices for goods, which could spur inflation. Maintaining stable prices via a 2% rate of inflation is one of the Federal Reserve’s primary goals, and one the Fed has been struggling to make happen.

If the rate of inflation accelerates, the Federal Reserve may want to slow it down by raising interest rates. Maintaining rates as is — which 75% of traders expect — could be an inflation-focused middle path.

Though the Federal Reserve doesn’t directly set mortgage rates, Fed moves are one of many influences on rates for home loans. Uncertainty surrounding the Fed obscures the longer-term outlook for mortgage rates.

Candidate Trump vowed to bring mortgage rates lower. “We’re going to get them back down to, we think 3%, maybe even lower than that, saving the average home buyer thousands of dollars per year,” he told the Economic Club of New York back in September 2024.

In those remarks Trump also noted that, in his first term, “We had them down to 2.4% and even lower than that for a period of time.” That’s not exactly true — Freddie Mac logged the lowest annual average 30-year fixed rate at 2.65% back in Jan. 2021 — but it’s close.

That’s still kind of a weird flex: Mortgage rates dropped that low because of emergency actions taken by the Federal Reserve to forestall economic damage from the pandemic. Sure, it was less costly to purchase a home, but those low mortgage rates came at a high price.