Refinance applications boomed last week and rates are continuing to tick lower – but could Trump's tariffs cloud the outlook?
Has the tide just turned for the US mortgage market? Applications shot upwards last week thanks to a sharp decline in mortgage rates, according to the Mortgage Bankers Association (MBA), with homeowners rushing to snag lower borrowing costs as refinance activity soared.
As the average 30-year fixed mortgage rate tumbled to 6.73% – its lowest level since the end of 2024 – refinance applications spiked by a full 83% year over year in the week ended February 28, and by 37% since the prior week.
That helped spur an overall 20.4% jump in total mortgage application volume week over week, with purchase applications rising by 9% and coming in 2% higher than the same time last year.
Plenty of uncertainty remains on the economic and political outlook, not least after US president Donald Trump launched a trade war with Canada and Mexico that critics say could pass on higher costs to American consumers and stir inflationary pressure.
But for now, sentiment towards the housing market appears to be improving, according to Florida-based broker-owner Ashlin Endter (pictured below) of 4MG Mortgage Co.
She told Mortgage Professional America that while rates remained much higher than seen during the COVID-19 pandemic, borrowers appeared to be coming to terms with the new rate reality – particularly with no prospect of a return to those COVID-era lows.
Sitting on the sidelines and waiting for the perfect time to buy a home is an approach that’s burned many buyers in the past, Endter said.
“Don’t time the market. That’s the thing – everyone who’s trying to time the market is still sitting there, and they were probably the same people who were trying to [do the same] five years ago,” she said.
“They got out there and did analysis paralysis [during COVID]. They had 3% interest rates and thought it was too risky, and then house prices skyrocketed and there were 40 offers on every single home.”
Treasury Secretary Scott Bessent predicts a US housing market rebound and faster inflation decline, citing deregulation and energy expansion. Meanwhile, mortgage rates remain high, posing affordability challenges. https://t.co/nuyQ3zfzeG
— Mortgage Professional America Magazine (@MPAMagazineUS) March 4, 2025
Buyers stepping off the sidelines as inventory improves
Those rock-bottom rates aren’t coming back, at least in the short-to-medium term, and Endter said that’s convincing many buyers now is the time to take the plunge.
“Interest rates can’t go back down to a bare minimum like we had. That’s not healthy for our financial environment,” she said. “It’s not healthy for our economics. The reality is, rates are what they are – and the difference between a 7% and a 6% is $100, $200, so find the ways to make it work.”
That’s contributing to a steady if unspectacular pace of homebuying and refinance activity at present, according to Endter, particularly as inventory snarls ease up and more supply comes to market.
“It’s just a very giving market. People are excited. There are a lot of programs for first-time homebuyers too. There are a lot of incentives for people to buy right now, so it’s a great market and I think it’s going to be a phenomenal year. It’s still going to be challenging because interest rates are still too high – but I think the right [deal] is out there for everyone.”
Tariff war injects uncertainty into housing market outlook
A potential spoke in the wheel for the housing market, though, is that looming prospect of higher homebuilding and buying costs if the government pushes ahead with its tariff war – especially against Canada.
Affordability is already stretched for plenty of buyers across the country, and Trump’s levies against imports including home appliances, lumber and other construction materials could drive up the cost of building a home by as much as $10,000, according to National Association of Home Builders (NAHB) chief economist Robert Dietz.
With about a third of lumber used in US homebuilding originating from Canada, lumber costs alone are expected to hit $4,900 per home – while there are also question marks about whether the tariffs will stoke inflationary pressures.
“Based on what we know today… I do factor in some effects of tariffs now on inflation, on prices, because I think we’ll see some of those effects later this year,” Federal Reserve Bank of New York president John Williams said Tuesday during a Bloomberg conference.
But he said the outlook is by no means clear, especially when it comes to how inflation impacts business sentiment and consumers’ spending appetite. “That’s where I think another big uncertainty is.”
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