The back and forth on tariffs between President Donald Trump‘s administration and the courts is leaving mortgage rates stuck in something “like Groundhog Day,” according to Melissa Cohn, regional vice president of William Raveis Mortgage and a 43-year industry veteran.
“It feels like we are starting all over again every day,” she said in a statement shared with Newsweek. For mortgage rates, which many Americans are hoping would come down soon, that likely means little to no movement in the foreseeable future.
Why It Matters
After dropping to historically low levels during the pandemic, mortgage rates suddenly surged in 2022 as a result of the Federal Reserve’s aggressive rate-hiking campaign to combat inflation. Since then, they have lingered between the 6-percent and the 7-percent mark—more than double their pandemic lows. As of May 29, the 30-year fixed-rate mortgage was 6.89 percent, according to Freddie Mac.
Elevated mortgage rates have exacerbated the U.S. housing affordability crisis, pushing many aspiring homebuyers to the sidelines and locking in existing homeowners. Lower rates would be welcome news for the market—but the instability spurred by Trump’s tariff policies has undermined hopes that the Fed would lower its key interest rate any time soon, triggering a decline in mortgage rates.
What To Know
The Trump administration’s sweeping tariffs were blocked by a U.S. trade court last week, which ruled that the policies “exceed any authority granted to the president,” only to be reinstated a day later by a federal appeals court, pending a hearing.
For the financial markets, who initially cheered the trade court’s ruling, it was a fast roller coaster of emotions. The tariffs remain in place pending an appeal hearing and the Trump administration is likely to take the case to the Supreme Court if it loses, promising not to easily let go of the policies that have thrown the global economy into panic mode.
For the mortgage markets, however, this back and forth between the Trump administration and the courts essentially translates into a standstill. Cohn believes that, in the current situation, the Fed will have a hard time forecasting a rate cut accordingly.
“Tariffs by design increase the cost of goods. Higher prices equal higher inflation. Bond yields have remained at elevated levels and will do so until the tariffs are either formalized or eliminated. Mortgage rates remain higher with bond yields,” she told Newsweek.
“With a weakening economy, it was hoped that the Fed would be able to lower rates, but the potential for inflation to rise with the tariffs has the Fed on hold as well,” Cohn explained.
“This shaky economy has also kept buyers and sellers on the sidelines. Higher rates and economic uncertainty are bad news for the real estate market. Tariffs also hurt as they will increase the cost of building materials.”
The ‘One, Big, Beautiful Bill’
There is a new factor to consider in the mortgage rates equation: House Republicans‘ domestic policy bill, the “One, Big, Beautiful Bill” cherished by the Trump administration which would extend the tax cuts implemented by the president during his first term in office and introduce new ones.
“If the SALT [state and local tax] deduction cap is raised, that could be a big benefit to homebuyers and sellers in high-tax states. Other than that, most of the benefits of the new bill go to high-income families and not to middle America,” Cohn said.
“The bill will create larger deficits as well, and the U.S. government is going to have to print money to pay their bills. That will keep mortgage rates higher. The tariffs are a bigger deal to the real estate and mortgage markets. “
What People Are Saying
For homebuyers and homeowners hoping for mortgage rates to come down soon, mortgage industry expert Melissa Cohn has bad news.
“I don’t expect to see any meaningful reduction in mortgage rates this year,” she said. “The uncertainty of the tariffs, which will not get resolved for several months, has the markets on edge, as we don’t know just how much higher they will push the rate of inflation.”
Until the impact of the Trump administration’s tariffs on the rate of inflation and the economy becomes clear, she said, “I expect that we will remain range bound.”
Chen Zhao, head of economics research at Redfin, said in a recent report that mortgage rates are unlikely to “move much in the near future because the administration has other options to implement tariffs.”
If most, or all, of the tariffs introduced by the president since Inauguration Day “were called off, however, mortgage rates would likely fall,” she said.
“While lower recession risk and more money flowing from the bond market to equity markets will push rates up, removing the tariff-induced recession risk would allow the Fed to continue rate cuts as inflation settles toward 2 percent. That could ultimately bring mortgage rates down by as much as 25 to 50 basis points.”
What Happens Next
In a statement issued on Thursday following a meeting between the U.S. central bank’s head Jerome Powell and Trump, the Fed said that Powell “did not discuss his expectations for monetary policy, except to stress that the path of policy will depend entirely on incoming economic information and what that means for the outlook.”
White House press secretary Karoline Leavitt said that during the meeting, Trump “did say that he believes the Fed chair is making a mistake by not lowering interest rates.” The president pledged lower mortgage rates during his 2024 presidential campaign. He might have to wait a little longer before being able to keep that promise.
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