Are Trade Deals Good for Mortgage Rates? Here’s What You Need to Know

If you’ve been watching mortgage rates lately, you may have noticed some rollercoaster-like movement — especially since the announcement of the latest round of tariffs. But there’s one question a lot of homebuyers and homeowners are asking:

👉 Can trade deals actually help lower mortgage rates?

Let’s unpack what’s going on.

📉 What’s Been Happening with Rates?

In early April, the U.S. imposed what some are calling “Godzilla tariffs” — large-scale import taxes that rattled markets and caused bond yields to swing wildly. Since mortgage rates tend to follow the 10-year Treasury yield, we saw some sharp movements in mortgage pricing too.

Mortgage rates temporarily shot up after tariffs were introduced, even though bond yields fell initially. Why? Because spreads — the gap between what investors pay for bonds and what lenders charge for mortgages — widened, adding 0.15% to 0.20% to typical mortgage rates.

At their worst, rates climbed near 6.82%, but without that widened spread, they could’ve been closer to 6.62% — near the lowest levels of 2025.

🧩 So Where Do Trade Deals Come In?

Recently, markets have started to settle. The 10-year yield has leveled off around 4.17%, and job reports suggest a softening (but not collapsing) labor market. That’s giving investors and borrowers alike a moment to breathe.

Even more encouraging? The return of trade talks.
If the U.S. can successfully negotiate new trade deals, it could lead to:

• Improved supply chains (just like post-COVID)
• Lower inflationary pressure
• A more confident Federal Reserve

And when the Fed sees more economic stability and lower inflation, they’re more likely to consider cutting interest rates — or at the very least, not raising them. That’s good news for homebuyers, refinancers, and the real estate market overall.

🤝 What the Fed May Do Next

Federal Reserve officials, like President Waller, have hinted that they’re watching the labor market closely. If jobs begin to vanish and growth slows, the Fed might lean into aggressive rate cuts — especially if they believe the tariffs’ effects are short-term.

The catch? This outlook largely depends on how trade negotiations unfold.

• If deals are reached: Mortgage rates could drift lower. The Fed may shift its focus toward stimulating growth rather than taming inflation.
• If deals fall through: The Fed could become more cautious, worried about shortages and rising prices.

🔮 Our Forecast: What’s Ahead for 2025?

We’re still sticking with our prediction:

• 10-Year Yield Range: 3.80% – 4.70%
• Mortgage Rate Range: 5.75% – 7.25%

So far this year, we’ve stayed within those lines, even amid big swings. But a strong trade agreement could push us toward the lower end of that forecast — and that’s the sweet spot for home financing.

💡 What It Means for You

If you’re thinking about buying a home, refinancing, or helping a client make a move, it’s a good idea to:

• Keep a close eye on trade and Fed news
• Talk with a trusted loan officer (like us!) to lock in a favorable rate
• Consider options like rate buydowns, temporary buydown programs, or down payment assistance to make your move more affordable

At Southern Home Loans, we’re here to help you navigate the market — no matter how wild the ride gets.