Recent tariff increases have led to a stock market sell-off and caused the 10-year Treasury yield to fall below 4%, influencing mortgage rates. However, yields have since risen again, creating uncertainty around future mortgage rate movements. Federal Reserve Chair Jerome Powell indicated that the central bank will assess the tariffs' effect before making rate decisions, stressing the potential for larger-than-anticipated economic impacts, including inflation and slower growth. This scenario places mortgage rates at risk of rising, especially if the Fed opts against cutting rates this year.
While uncertainty remains elevated, it is now becoming clear that the tariff increases will be significantly larger than expected. The same is likely to be true of the economic effects, which will include higher inflation and slower growth.
Tariffs are expected to push inflation higher, which may lead to higher mortgage rates. If the Fed doesn't end up cutting rates this year, mortgage rates may rise.
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