Mortgage Rates Today, Apr. 3, 2025: Rates After Tariff Day

The bigger picture

Mortgage rates and stock indices rose yesterday afternoon on hopes that the 4 p.m. tariffs announcement would not be too severe. But that changed very quickly once the announcement was underway.

Mortgage rates don't trade after hours, but the stock market does. And the futures market tumbled, sending all indices lower. For example, The Wall Street Journal said futures tied to the S&P 500 slumped 2.2% just during the announcement ceremony.

How come? Well, MarketWatch says the announcement revealed "tariffs on U.S. trade partners that were higher than investors were expecting."

The Journal reported, "China will be charged a 34% tariff, the chart said, the European Union will get a 20% levy, Vietnam will get 46%, Taiwan will get 32%, India will get 26% and Japan 24%." A later official clarification said those numbers include a baseline 10% that will be applied to all imports regardless of their source. So, China will pay the baseline 10% plus 24%, and so on.

Worrying outlook for the economy typically good for mortgage rates

Investors are presumably assuming that the new levies will inflict considerable damage on the U.S. economy as well as global trade.

Following the announcement ceremony, The New York Times quoted reactions from a couple of trade groups. "The National Retail Federation said in a statement that the tariffs would cause more anxiety and uncertainty for American businesses and consumers. Tariffs are not paid for by foreign countries or suppliers, but by U.S. importers, the group said," according to the Times' report.

Meanwhile, Jay Timmons, president of the National Association of Manufacturers, said in a statement quoted by the Times, "The high costs of new tariffs threaten investment, jobs, supply chains and, in turn, America’s ability to outcompete other nations and lead as the preeminent manufacturing superpower."

Yesterday, we quoted CNN on Tuesday when it gave a worst-case scenario of what might emerge today: a 20% universal tariff — combined with full retaliation from other nations on US goods. "A Moody’s simulation found that such an escalation in the trade war would wipe out 5.5 million jobs, lift the unemployment rate to 7% and cause US GDP to drop by 1.7% from peak to trough," said the broadcaster, citing Moody’s Analytics chief economist Mark Zandi.

Well, the universal tariff was only half the worst-case scenario. However, levies much higher than 20% are to be imposed on some of our biggest trading partners, which might turn out to be worse than the worst case previously envisaged.

Inflation could set a floor for mortgage rates

Yesterday, we wrote that the Moody's Analytics simulation would likely "cause mortgage rates to tumble, at least in the short term." And we'll be surprised if they don't fall appreciably today.

However, unlike stock indices, there's a floor beneath which mortgage rates probably won't sink. That's because many believe tariffs will fuel inflation, something hated by bond investors.

And mortgage rates are largely determined by yields on a particular bond, the mortgage-backed security (MBSs). So, if inflation does rise, investors will simply refuse to buy MBSs unless the yields they receive increase, too. Hotter inflation is also likely to force the Federal Reserve to pause its plans to cut general interest rates later this year, also putting the brakes on falling mortgage rates.

Of course, it will likely take months for any tariff-generated inflation to turn up in official data. And in the meantime, we may see sustained lower mortgage rates. Potential borrowers and refinancers may see that as a window of opportunity.

Coming up

Although economic reports are usually the main drivers of changes to mortgage rates, they're not the only ones. The general mood in markets and economically consequential news can also affect those rates — as we've seen frequently recently, especially over tariffs.

Here are the thoughts of Comerica Bank's chief economist on this week's economic reports:

"The March jobs report will probably show a modest increase in employment and a small uptick in the unemployment rate. The average workweek is
expected to have edged higher, while wages likely rose moderately ... The ISM Services PMI, on the other hand, is expected to show continued expansion of the services sector, though at a slower pace ... The trade deficit in goods and services probably narrowed in February on the back of a lower goods trade shortfall."

Mortgage rates today

Today's most important economic reports are likely to be a couple of purchasing managers' indices (PMIs) for the services sector in March. According to the MarketWatch economic calendar, these are expected to show activity in the sector slowing a little that month, contrary to the Comerica Bank forecast above.

However, we suspect that yesterday's tariff announcements will probably distract markets from pretty much everything else, including those reports.

As a general rule, mortgage rates tend to fall when actual figures are smaller than markets are expecting and rise when they're bigger.

Tomorrow

Tomorrow should bring the March jobs report. And that's often the single most consequential economic report in any given month.

We'll delay publishing this column tomorrow so that we can bring you the new data. See you again at about 9 a.m. Eastern on Friday.