Sliding bond yields may spell good news for borrowing costs, but the mortgage industry isn't getting carried away
US mortgage rates slipped lower on Thursday, some of the only positive news for the US economy last week as money markets reeled from the shellshock of sweeping new global tariffs introduced by President Trump.
Freddie Mac said the 30-year fixed mortgage rate ticked down to 6.64% on April 3, marking its lowest level since October of last year, with a potential further slide on the way as unease ripples through the US economy at the potential impact of Trump’s wave of punitive measures against trading partners.
The labor market added more jobs than expected last month, according to Bureau of Labor Statistics data released Friday, although the jury is also out on whether that trend will continue with Trump’s trade war threatening to weigh down economic growth.
The future for the mortgage market remains unclear. While rates may be set to continue on a downward trajectory in the weeks and months ahead, a weakening economy could also stir fears of job losses and a jump in unemployment.
What’s more, Federal Reserve chair Jerome Powell warned Friday that Trump’s tariff war could stoke inflation and keep the central bank on the sidelines even if the economy begins to grind to a halt.
Should homebuyers put their purchasing plans on hold?
For those borrowers who are still tempted to make their move despite the economic storm clouds, the coming weeks could offer some opportunity, according to Greenside Capital president Kurt Brandly (pictured top).
He told Mortgage Professional America prior to Trump’s bombshell tariff announcement that while there had been plenty of doom and gloom around the mortgage outlook in the opening months of 2025, some clients were seeing potential in lower borrowing costs down the line.
Following Trump's global tariffs, markets anticipate the Fed will cut rates by 100 basis points in 2025 to counter recession fears.https://t.co/vjnxl4B2k0
— Mortgage Professional America Magazine (@MPAMagazineUS) April 4, 2025
“When I talk to my clients I go through this stuff. If they have questions or concerns about how tariffs will impact interest rates, I remind them the typical song and dance is that fear does typically drop interest rates, at least in the short term,” Brandly said.
“People take money out of stocks. They dump them into bonds and we see rates drop. If anything, that’s more of an opportunity than anything else. So I remind my buyers: ‘Take advantage of those kinds of situations when they do happen.’”
That’s not to say borrowers are entirely free of apprehension about the tariff outlook, with the S&P 500 posting its most dramatic nosedive since the beginning of the COVID-19 pandemic and Trump doubling down on a strategy that’s already wiped trillions off the global stock market.
Is a US recession looming?
Chances of a recession in the US also appear to have spiked. Even prior to Trump’s tariff announcement, Goldman Sachs had increased odds of an economic downturn to 35% because of falling consumer and business confidence and the willingness of Trump and his team to countenance sharp pain for the economy in pursuit of its goals.
Trump returned on Friday to a common talking point, repeating a call for Powell to start lowering interest rates, but the Fed chair’s suggestion that tariff-related inflation could be persistent appeared to pour cold water on the prospect of an immediate cut.
That’s despite money markets now expecting the Fed to cut rates by a total of 100 basis points in 2025, likely in four 25-point moves.
Still, Brandly said now remains a “great time to buy” for those who are confident enough in their economic future to push ahead with a home purchase.
“I think there’s plenty of activity in the market. I think rates are in a very good spot,” he said. “I think it’s OK to be a little bit afraid of what’s happening in markets – but focus on data rather than the doom-and-gloom posts that you see all over the place, and that’s going to put you in a lot better spot.
“Talk to either a broker or lender or somebody who knows a lot about this kind of stuff and they’re going to point you in the right direction.”
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