This past week brought big changes for mortgage rates — and if you’re someone keeping an eye on interest rates, it was a week worth watching. Rates dropped to their lowest levels since October 2024, driven by a wave of uncertainty in global markets triggered by new trade tensions.
While a few key economic reports were released, the real driver of the market movement was Wednesday’s announcement of new U.S. tariffs. That news, followed by a swift response from China late Thursday, sent shockwaves through the financial world.
When uncertainty like this hits, investors tend to get nervous. They often respond by moving money out of stocks and into safer investments like U.S. Treasury bonds. This “flight to safety,” as it’s called, pushes bond prices up — and since mortgage rates are tied to bonds, that means rates come down.
China’s retaliatory tariffs on U.S. goods only heightened those concerns, fueling a sharp sell-off in stocks and a rally in bonds. The impact was clear: markets reacted swiftly, and mortgage rates continued their downward slide.
We can also look at something called the VIX — a widely used measure of stock market volatility — to understand how dramatic the moves were. It surged this week, showing just how jittery investors have become.
On top of that, the sudden shift in market sentiment led investors to expect more aggressive interest rate cuts from the Federal Reserve in 2025. Markets are now pricing in a higher likelihood of the Fed taking action to support the economy, which also adds downward pressure on mortgage rates.
By Friday morning, rates were at their lowest in months. However, some of those gains faded by the afternoon, reminding us that markets can be unpredictable — especially when news headlines are driving the action.
It’s important to remember that while rates are currently favorable, the situation can change quickly. Tariff policies can shift overnight, and mortgage rates may rebound just as fast as they fell.
In the long run, what really matters for interest rate trends isn’t just the trade talk — it’s the actual impact these tariffs have on the broader economy. This week’s rollercoaster ride in the markets is a clear sign that investors are starting to worry about that impact.
