Mortgage Rates Hit Highest Level Since February as Bond Market Reacts to Tariffs

Mortgage rates have spiked markedly in the last week. They have now climbed back to 7.1% for a typical 30-year fixed mortgage, the highest level since mid-February. This dramatic increase follows a series of developments in the bond market, particularly the implementation of new tariffs on numerous countries that intensified volatility.

Mid-week, bond yields shot up significantly, impacting the increase in mortgage rates. Notably, these most recent figures showed a sharp decrease in inflation expectations. They jumped from 5% in March to 6.7% in April, the highest single level of jump since 1981. On Friday, the bond market’s response was to sell off again. This reaction came on the heels of a cooler-than-expected inflation print, which further muddied the financial waters.

As the situation unfolded, Matthew Graham, the chief operating officer at Mortgage News Daily, provided insight into the current market dynamics. He noted, “This is either the end of the worst week for 10-year yields since 1981 or the end of a fairly average two weeks that fit right in with the trend of the past 18 months.” His commentary is instructive of the overall uncertainty in bond trading and its effect on mortgage rates specifically.

The new tariffs, which took effect just a few days ago, were one of the leading forces that investor sentiment pointed towards. At first, yields fell when former President Trump cut tariff rates for all but a few countries within hours of the announcement. Unfortunately this go-round, it was only a short reprieve as bonds started selling off again by Friday.

Nancy Lazar, the global chief economist at Piper Sandler, warned of 7% mortgage increases. These new rates, she noted, would “substantially harm the housing market.” She stated, “Forget about housing in this environment,” emphasizing that with mortgage rates climbing back up and consumer apprehension about the job market growing, housing is likely to remain weak. Her comments, though, are a reminder of what would-be homebuyers are up against in a chaotic economic environment.

Adding insult to injury, yet another consumer monthly survey—this one from the University of Michigan—plummeted below already low expectations. Between climbing rates and worsening sentiment, headwinds are still formidable for home buyers hoping to find that elusive affordable home. Instead, they’ll face tremendous hurdles along their route to home ownership.