Mortgage Market Update: Rising Rates, Tariff Impact, and Shifting Buyer Dynamics Shape April and May Trends
Mortgage Market Trends Highlight Rising Rates Tariff Fears and Changing Buyer Dynamics
What's Included:
Mortgage applications dropped as rates hit 2025 highs, but purchase demand grew with better inventory.
Possible changes to Fannie Mae and Freddie Mac raise concerns about higher mortgage costs.
Savvy buyers use slower markets and higher inventory to find good deals.
Tariff fears drove a rise in auto and mortgage borrowing in April.
Here’s a complete low-down 👇
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Mortgage Applications Dip as Rates Hit New 2025 Highs
Mortgage application activity continued its downward trend for the week ending May 23, 2025, according to the Mortgage Bankers Association (MBA). Total applications dropped 1.2% on a seasonally adjusted basis, driven largely by a 7% decline in refinance applications. Rising interest rates were the main culprit, with the average 30-year fixed mortgage rate climbing to 6.98%—the highest level since January.
While refinance volumes slid, they still remain 37% higher than the same time last year. Conventional refinance applications were down 6%, while VA refis took a sharper 16% hit. The refinance share of total mortgage activity also dropped from 36.6% to 34.6%, as rising Treasury yields pushed mortgage rates higher and discouraged rate-sensitive borrowers from refinancing.
Surprisingly, purchase applications rose 3% despite the challenging rate environment and are now 18% above last year’s levels. According to MBA’s Joel Kan, the uptick in purchase activity reflects improving housing inventory across several markets, helping sustain buyer demand. Adjustable-rate mortgage (ARM) share also ticked up to 7.5%, indicating that some borrowers are seeking alternatives to manage affordability amid continued rate pressure….Read More.
Trump’s GSE Remarks Stir Uncertainty Over Mortgage Rates and Fees
President Donald Trump's recent remarks about taking Fannie Mae and Freddie Mac public while retaining government oversight have sparked speculation about potential impacts on mortgage rates and guarantee fees (g-fees). Industry experts express concern that removing the government-sponsored enterprises (GSEs) from conservatorship could lead to increased g-fees and higher mortgage rates, especially if the implicit government guarantee is perceived as weakened. Analysts suggest that lenders might pass these increased costs onto borrowers, potentially raising monthly mortgage payments .
The Urban Institute projects that g-fees could rise by 10 to 25 basis points in a post-conservatorship scenario, depending on the strength of the government's guarantee. Some experts argue that if the implicit guarantee is maintained, the impact on mortgage rates could be minimal. However, others caution that uncertainty surrounding the guarantee's strength could lead to increased costs for borrowers
While the Trump administration emphasizes maintaining government oversight and guarantees, the lack of detailed plans has left stakeholders uncertain about the future of the GSEs and the potential effects on the housing market. As discussions continue, borrowers and lenders alike are closely monitoring developments to assess how potential changes could influence mortgage affordability…..Read More.
Housing Market Shows Mixed Signals — But Savvy Buyers Are Gaining Ground
As the housing market slows, a surprising group is finding opportunity: experienced buyers and investors. With homes sitting longer and sellers slashing prices, buyers like Nora Douglas in Atlanta are reentering the market with more power to negotiate. “Even though interest rates are high, buyers have a lot of options right now,” she said, citing reduced competition and falling listing prices as key advantages.
Inventory levels have reached five-year highs, according to the National Association of Realtors, giving buyers across most U.S. regions the upper hand. Fewer bidding wars and a wider selection of homes mean more room to choose wisely — a welcome change for seasoned buyers like Francis Shaw in Charlotte. “I get to be more selective,” he noted, as he shops for a fourth property in a much calmer market.
While high mortgage rates are still a barrier for many first-time buyers, others see the current market as a strategic moment to invest. With prices softening and competition low, those who can navigate the rates are finding better deals — and a rare chance to buy on their own terms….Read More.
Tariff Fears Drive Spike in April Auto, Mortgage Borrowing
Consumer borrowing surged in April, with auto and mortgage loans seeing notable upticks — and rising tariff concerns may be partly to blame. According to the Federal Reserve, overall consumer credit increased by $11.4 billion, with nonrevolving credit (including car and mortgage loans) accounting for much of the gain. As trade tensions escalated, some buyers rushed to secure loans before potential price hikes hit the market.
Auto lending saw a significant rise, as consumers looked to lock in purchases ahead of possible tariffs on imported vehicles and parts. Economists suggest that fears of increased costs drove early buying activity, prompting more people to finance their vehicle purchases in April. Similarly, mortgage borrowing ticked up as homebuyers tried to stay ahead of any economic uncertainty triggered by ongoing trade disputes.
While revolving credit, like credit cards, grew more modestly, the sharp rise in nonrevolving credit highlights how geopolitical issues can influence consumer behavior. With interest rates still relatively low, some borrowers saw April as a window of opportunity — to buy big-ticket items before tariffs potentially drove prices higher. The data underscores how quickly global events can impact financial decisions at home…Read More.
That’s a wrap on this week’s Mortgage Market Update. Stay ahead of rising rates, shifting buyer trends, and tariff-driven borrowing patterns.
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