Weekly Mortgage Rates

April 1,2025

Finally breaking below key resistance levels, rates are moving lower ahead of new tariffs to be announced tomorrow and softer incoming economic data. 

All jokes aside

Tomorrow is tariff day! It was decided that the reciprocal tariffs would be announced on April 2^nd because they didn’t want anyone to think it was a joke if announced on April Fool’s Day.

Market commentaries show many are hopeful that volatility will calm down after April 2^nd. Some certainty about the path ahead would help to calm markets and hopefully improve consumer sentiment. We will have to see if anything is more certain after tomorrow’s announcements.

Tariffs are meant to rebalance global trade with the thought that it will help to lower the federal deficit (which would help rates improve). But tariffs are also inflationary and can drive down demand, slowing the economy- perhaps to the point that the re-balancing plans fail. The point is no one knows. That uncertainty is driving everything right now.

Opposing forces- inflation versus the economy

All last week we waited in anticipation for the release of the most recent PCE inflation report. Core PCE ticked up higher than expected at 2.8%. Typically, a higher than expected reading would have caused mortgage rates to move up. Instead, they improved.

Countering the negative impact of inflation, the PCE report also showed consumer spending was lower than expected, with revisions lower on the previous month too. The consumer is pulling back. Adding this view, another look at consumer confidence showed it fell to dismal levels. Also the University of Michigan sentiment report was revised even lower, with long term inflation expectations from consumers rising to the highest levels in 30 years.  

This morning more stagflation news as the national ISM manufacturing index contracted further, new orders down, employment down, but prices paid higher- slower growth & higher inflation.

Stocks have been moving lower on the data and taking “risk off” ahead of tariff announcements. The bond market benefits since some of that money moves over to be parked in the safety of bonds. More demand on the bond side sends interest rates lower. It is not always the case that stocks moving lower helps rates, but we are seeing that relationship between the two right now.

What’s ahead

Once again, it’s the first week of the month when we get all the employment news. If and when the labor market breaks, it will force the hand of the Fed to react despite still high and increasing inflation. These opposing forces inflation and the economy are battling it out- the biggest threat will win.

We have had a lot of volatility in daily rates but always seem to move back to the trendline that’s held for weeks. But late yesterday we broke below the key resistance on the 10-year yield at 4.20% and this morning more follow-through on this move lower, helping mortgage rates improve. The focus this week will be on the tariff news and employment, will see if we can hold the recent improvements once the dust settles.