{"id":13967,"date":"2025-04-23T07:01:15","date_gmt":"2025-04-23T07:01:15","guid":{"rendered":"https:\/\/finderica.com\/?p=13967"},"modified":"2025-04-23T07:01:15","modified_gmt":"2025-04-23T07:01:15","slug":"how-will-mortgage-rates-react-to-the-end-of-the-trade-war","status":"publish","type":"post","link":"https:\/\/finderica.com\/?p=13967","title":{"rendered":"How Will Mortgage Rates React to the End of the Trade War?"},"content":{"rendered":"
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Is it too soon to be talking about the end of the trade war?<\/p>\n

Perhaps, but there have been rumblings of a closed-door meeting to get a deal done, along with a softer stance from President Trump.<\/p>\n

The man who tends to get bond yields to calm down, Treasury Secretary Scott Bessent, was a speaker at said meeting.<\/p>\n

He reportedly called the current situation unsustainable with the two largest trade partners effectively frozen thanks to heavy reciprocal tariffs.<\/p>\n

So if\/when some sort of resolution springs up, could it get mortgage rates back on their downward trajectory?<\/p>\n

The Current Trade War Is Unsustainable<\/h2>\n

During the private investor summit that took place in Washington D.C., which happened to be hosted by none other than JPMorgan Chase, Bessent expressed<\/a> that the current impasse between the U.S. and China wasn\u2019t viable long term.<\/p>\n

And added that a de-escalation was expected in the \u201cvery near future.\u201d<\/p>\n

After all, China\u2019s largest trading partner is the United States. And by a wide margin<\/a>.<\/p>\n

Whereas our largest trading partners are Canada and Mexico<\/a>, which we made deals with<\/a> after initially threatening larger tariffs, followed by China.<\/p>\n

So clearly there\u2019s a lot at stake and an ongoing trade war would likely lead to a lot of unintended consequences neither side may actually want.<\/p>\n

There\u2019s also the thought that dialing things back after going further might be just the right amount of tariffs to appease both parties.<\/p>\n

A sort of Goldilocks level of tariffs might work, allowing both countries to feel as if they have won, or at least not lost<\/em>.<\/p>\n

And that could prevent bigger problems, such as China selling its Treasuries and MBS, which could further increase bond yields and mortgage rates.<\/p>\n

Many also expect tariffs to be inflationary and simply passed onto consumers, at a time when inflation finally seems to be under control.<\/p>\n

Simply put, if the pair can find a solution, we can put this behind us and get back on track.<\/p>\n

If you recall, things weren\u2019t so bad a few months ago, and many are now wishing we could just put the past couple months behind us and move on.<\/p>\n

Will It Really Be That Simple Though?<\/h2>\n

If I\u2019ve learned anything from this ongoing trade war, it\u2019s that not all is what it seems. One day President Trump is talking about firing Fed Chair Jerome Powell.<\/p>\n

And the next day he says he\u2019d never do such a thing<\/a>. Oh, and last week he mentioned that Chinese tariffs would \u201ccome down substantially.\u201d<\/p>\n

\u201cI think that we will make a deal with China,\u201d Trump told reporters<\/a> at the Oval Office. Though he added \u201cI think we have plenty of time.\u201d<\/p>\n

Huh? But I thought it was pedal to the metal on tariffs and Jerome\u2019s got to go?<\/p>\n

I guess that was yesterday and last week, and Tuesday is a different ballgame. Does make you wonder what Wednesday will bring though, eh?<\/p>\n

That\u2019s kind of the point I\u2019m trying to make here. It would be pretty na\u00efve to think this is it, the trade war\u2019s over.<\/p>\n

No way. There\u2019s definitely going to be another twist in this tale. Heck, I wouldn\u2019t be surprised if Trump threatens Powell\u2019s job again. Or if tariffs on China go even higher, somehow.<\/p>\n

It is this very uncertainty that has led to so much volatility in the markets, whether it\u2019s stocks or bonds.<\/p>\n

The stock market has gotten pummeled and mortgage rates, very recently trending down to the low 6s, are back to basically 7%.<\/p>\n

And they\u2019re there at the worst possible time, the spring home buying season. Not great with inventory beginning to pile up as affordability remains out of reach for many.<\/p>\n

I Still Expect Lower Mortgage Rates in the Third Quarter and Onward<\/h2>\n

While it\u2019s next to impossible to know what\u2019s next in this trade war saga, chances are it\u2019ll go on a bit longer.<\/p>\n

As Trump said, there\u2019s still time and apparently no rush to make a deal. But the more important piece is that a deal will come<\/strong>.<\/p>\n

So it might be best to just zoom out and ignore all the short-term noise while this evolves (and devolves) and hopefully gets better again.<\/p>\n

How long might that take? Well, perhaps we should just throw out the second quarter, which ends on June 30th.<\/p>\n

Just be patient and wait for a resolution. Of course, prospective home buyers can\u2019t just sit around and wait if they happen to find a property they like.<\/p>\n

They might have to settle for a higher mortgage rate. The same goes for existing homeowners looking for rate relief from a rate and term refinance. Might have to hold out a little longer.<\/p>\n

But I do still think relief is coming in the second half of the year. And that would align with my 2025 mortgage rate prediction, which has the 30-year rising in the second quarter before falling in Q3 and Q4.<\/p>\n

In fact, I have the 30-year dropping to 6.25% in the third quarter, then to 5.875% by the fourth quarter.<\/strong><\/p>\n

It just might be (probably will be) choppy along the way. And while I\u2019m hopeful my prediction comes true, we can\u2019t rule anything out with this administration.<\/p>\n

Things might get worse before they get better.<\/p>\n

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\"Colin<\/div>\n
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Before creating this site, I worked as an account executive for a wholesale mortgage lender in Los Angeles. My hands-on experience in the early 2000s inspired me to begin writing about mortgages 19 years ago to help prospective (and existing) home buyers better navigate the home loan process. Follow me on X for hot takes.<\/p>\n<\/div>\n<\/section>\n

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\"Colin<\/div>\n
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