What Do Tariffs Mean for Mortgage Rates?
By Dan Noma | Easy Street Offers
How Tariffs Impact Mortgage Rates for Real Estate Agents
Tariffs, which are taxes on imported goods, can indirectly impact mortgage rates, home prices, and
buyer behavior. Understanding these economic shifts allows real estate agents to advise clients
effectively, adjust pricing strategies, and navigate changing market conditions.
Tariffs and Inflation: Why It Matters for Homebuyers
Increased Costs and Higher Interest Rates: Tariffs raise the cost of imported materials, leading to inflation as businesses pass expenses onto consumers. To control inflation, the Federal Reserve may increase interest rates, making mortgages more expensive and reducing buyer affordability.
A CNBC report noted that interest rate hikes in response to inflation have slowed mortgage applications as buyers hesitate due to higher borrowing costs (CNBC).
How This Affects Your Clients
Reduced buying power: Higher mortgage rates mean clients qualify for smaller loans.
Slower market movement: More buyers wait, reducing competition.
Increased demand for alternative financing: Buyers seek adjustable-rate mortgages (ARMs) or seller financing.
The Connection Between Tariffs, Treasury Yields, and Mortgage Rates
Why Mortgage Rates Fluctuate: Mortgage rates closely follow 10-year Treasury yields. When tariffs create economic uncertainty, investors move money into safe-haven assets like U.S. Treasury bonds, often lowering yields and mortgage rates.
However, prolonged market instability can have the opposite effect, driving rates higher as inflation
rises. According to Bloomberg, trade wars and tariff hikes have contributed to volatile mortgage
rates over the past several years (Bloomberg).
How Tariffs Affect the Housing Market
Higher Construction Costs = Higher Home Prices
Tariffs on lumber, steel, and aluminum make homebuilding more expensive. As builders pay more for materials, those costs pass to buyers, increasing new home prices.
A Realtor.com study found that tariffs on Canadian lumber have contributed to a rise in new home prices and slowed housing inventory growth, impacting affordability for first-time buyers (Realtor).
Supply and Demand Shifts
Higher Mortgage Rates = Reduced Buyer Demand → Agents should target motivated buyers who can’t wait to move.
Fewer New Homes Built = Tighter Inventory → Existing homes gain market value, benefiting sellers.
Buyers Delay Purchases → Increased rental demand provides investment opportunities.
Sellers Gain Leverage in a Low-Inventory Market
As fewer new homes are built, existing home prices hold steady or rise due to limited supply. Agents should position their listings strategically to maximize seller profits in a high-demand, low-supply environment.
How Real Estate Agents Can Help Clients Navigate Tariff-Driven Markets
Encourage Fixed-Rate Mortgages
Fixed-rate mortgages offer stability in uncertain markets. Buyers locking in rates today avoid potential future increases.
Educate Buyers on Economic Trends
Clients need clear explanations on how tariffs affect mortgage rates and affordability. Agents
who simplify these concepts help clients make informed decisions.
Advise on Timing and Rate Locking
If mortgage rates are rising, urge buyers to lock in rates quickly.
If rates seem to be dropping due to economic uncertainty, watch market trends before committing.
Adapt Selling Strategies
For Buyers: Show how adjustable-rate mortgages (ARMs) or interest rate buydowns can lower initial payments.
For Sellers: Highlight the investment value of real estate in a fluctuating market to attract buyers.
Conclusion: Stay Informed to Stay Ahead
Tariffs impact inflation, interest rates, and home prices, affecting buyer behavior and real estate
market dynamics. Agents who stay ahead of economic trends can guide clients effectively,
capitalize on market shifts and maintain a competitive edge.