Homebuyers are getting more relief from high mortgage rates, but not for reasons anyone would hope for.
The average 30-year mortgage rate fell to 6.63% for the week through Wednesday, from 6.76% a week earlier, according to Freddie Mac data. The latest drop came after President Donald Trump implemented sweeping tariffs on goods imported from Canada, Mexico, and China and markets digested a string of downbeat economic data that sparked a selloff and raised new fears about a possible recession in the US.
15-year mortgage rates also dropped to 5.79%, from 5.94%.
Despite the economic uncertainty, lower rates over the last week spurred a spike in mortgage applications for home purchases and refinancings. Refinancing applications rose 37% through Friday, compared with a week earlier, according to the Mortgage Bankers Association, while purchase applications were up 9%.
“The decline in rates increases prospective homebuyers’ purchasing power and should provide a strong incentive to make a move,” Sam Khater, Freddie Mac’s chief economist, said in a statement.
Mortgage rates move largely based on expectations about future Federal Reserve interest rate policy. After tariffs took effect on Tuesday following several weaker-than-expected economic reports, traders began fretting about a potential recession and pricing in additional rate cuts later this year.
The Fed last cut rats in late 2024 amid signs that inflation was cooling, but tariffs might complicate that picture when the Fed decides to cut again. Tariffs can push up prices while also discouraging consumer spending, a recipe for stagflation.
Read more: Mortgage and refinance rates today
Recession fears began mounting this week after the Atlanta Fed’s GDPNow model estimated that gross domestic product will decline 2.8% this quarter, and growth in the US manufacturing sector fell again. Private-sector hiring also slowed last month to the lowest rate since July, according to payroll provider ADP.
Amid the downbeat economic news, 10-year Treasury yields, which closely track mortgage rates, dropped to as low as 4.16% this week, down from a late February high of 4.4%. They’ve risen somewhat in recent days after data showed better growth in the services sector and Trump delayed certain auto tariffs and weighed exemptions for other goods. They’re now around 4.3%.
February’s jobs report, set to be released Friday, will provide yet another data point about the health of the economy. Economists expect that the US labor market added around 160,000 jobs last month. A significantly lower reading could intensify recession fears, pushing bond yields and mortgage rates down further, while renewed concerns around inflation would have the opposite effect.
