Interest rates on mortgages escalate to a two-month high, persistently influenced by Trump's tariffs, causing market turbulence.
Spring Shoppers Brace for Trade War Fallout
Are you house hunting during this blooming season? You might be experiencing the ripple effects of the intensifying trade war.
Last week saw a sizable 0.21% surge in standard, 30-year fixed mortgage rates, taking the average to 6.83%. This marks the largest week-on-week increase in mortgage rates in almost a year, as reported by Freddie Mac on April 17.
This sudden leap followed a steady decline in mortgage rates since March, potentially enticing some hesitant buyers to jump into the bustling spring homebuying season. But the chaotic tariff strategies and escalating trade conflict with China have stirred up turbulence in the stock market, resulting in a US bond sell-off last week.
Mortgage rates often track the benchmark US 10-year Treasury yield, which soared as high as 4.5% a mere four days ago. Thankfully, the 10-year has seen a slight drop since then, trading around 4.3% as of Thursday.
Despite the recent uptick, the average 30-year fixed mortgage rate still falls below the 7% mark it hit last year at this time. Sam Khater, Freddie Mac's chief economist, asserts, "At this time last year, rates reached 7.1% while purchase application demand was 13% lower than it is today, a clear sign that this year's spring homebuying season is off to a stronger start".
Economic uncertainties fostered by the ongoing U.S.-China trade tussle can push investors towards safe assets like U.S. Treasury bonds, causing their prices to rise and yields to fall. This trend, in turn, can lead to reduced mortgage rates. However, if China were to offload its vast US bond holdings, possibly in response to tariffs, it could vice versa, inflate bond yields and boost mortgage rates.
Moreover, tariffs might inflate construction costs by increasing the prices of imported materials, potentially diluting house affordability and dampening mortgage demands. Stay tuned for updates on how the trade war may continue to shape mortgage rates during this spring homebuying season.
- On Wednesday, the average 30-year fixed mortgage rate fell slightly from its previous week's high, indicating a potential response to the turbulence in the stock market caused by U.S.-China trade tensions.
- In general-news, the ongoing trade war between the U.S. and China has been a significant factor in the recent fluctuations in mortgage rates, as tariffs have contributed to changes in the US 10-year Treasury yield.
- Rising mortgage rates, due in part to escalating tariffs, may impact the purchase application demand in the business world, slower demand for mortgages could be a consequence of the trade conflict.
- As house hunters navigate the spring homebuying season, they should be aware of the role that tariffs play in the economy, particularly in terms of increasing the prices of imported materials for construction, which could make houses less affordable.
- The trade war between the U.S. and China not only affects politics and business, but also the finance sector, with mortgage rates potentially being influenced by the decisions made by policymakers in both countries.