Mortgage rates might not be heading lower anytime soon — even with President Donald Trump pausing tariffs. A sharp sell-off in government bonds is a big reason why.
Yields on 10-year Treasury bonds — which tend to push mortgage rates higher when they rise — have jumped about 9% since bottoming out at 3.99% on April 4, reaching around 4.4% as of Thursday afternoon.
The stretch included the sharpest one-day jump since March 2020 and helped keep 30-year fixed mortgage rates hovering near 7%, according to Mortgage News Daily data.
That matters for borrowers because the 10-year yield is a key benchmark for mortgage rates; when it rises, mortgage rates usually follow. Yields move in the opposite direction of bond prices, so when investors pull back from buying Treasuries, prices fall and yields go up.
Going forward, mortgage rates could fluctuate between 6.5% and 7% with more changes than in recent months, which reflects “the elevated volatility in financial markets due to the tariffs and fears of a recession,” says Chester Spatt, professor of finance at Carnegie Mellon University’s Tepper School of Business.
This aligns with a forecast published Thursday by Zillow, which expects rates to end the year near the “mid-6% range.”
Why mortgage rates aren’t coming down yet
Last week, a roiling stock market briefly sent investors into the safety of government-backed U.S. bonds, causing yields to drop. But that didn’t last. Days later, amid a stabilizing stock market, escalating tariff threats and renewed inflation concerns, investors began dumping bonds, driving yields higher.
Then on Wednesday, Trump announced a 90-day pause that reduces tariffs for most countries — except China, which now faces a 145% tariff, “effective immediately.” A baseline 10% tariff still applies to imports from more than 180 countries.
So far, both bond yields and mortgage rates remain high. Mortgage rates tend to follow the 10-year Treasury yield decently quickly, sometimes within a couple of days, although exact timing can vary.
“It’s harder than usual to say where mortgage rates might go — we’ve got these factors that are pushing in opposite directions, and the news is changing very rapidly,” Realtor.com chief economist Danielle Hale tells CNBC Make It.
What’s going on with 10-year Treasuries?
Bond yields had already started rising before Wednesday’s announcement, driven by a mix of factors, Hale says. Inflation remains a concern, and with the Fed holding interest rates near recent highs, investors are demanding higher yields to hold long-term bonds.
At the same time, uncertainty around trade policy — including the inflationary effects of tariffs — and questions about the Fed’s next moves are adding to market caution, Hale says. Concerns about rising U.S. debt and deficits may also be making Treasuries seem riskier. And at the institutional level, more bonds are hitting the market as certain hedge fund trades unwind, she says.
The bottom line: Despite tariffs easing, uncertainty continues to drive the bond market — and that’s keeping mortgage rates elevated.
“There are a lot of questions in the market right now and it makes it harder than usual to predict which factors might be important in determining where the 10-year is going to go — and that, of course, then turns over to mortgage rates,” Hale says.
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