Mortgage rate volatility rises amid trade war, keeping LOs busy
At Mortgage News Daily, rates had risen to 6.85% by Tuesday afternoon, up from 6.63% last week, the lowest level for 2025. The movement was referred to by MND as the “worst 24 hours for rates so far.”
Big swings make lenders uneasy
Kevin Leibowitz, president of Grayton Mortgage, noted that after improving with the initial drop in the market on Thursday and Friday, mortgage rates reversed on Monday and Tuesday. “Typically (and now), lenders don’t get sharp on pricing until volatility settles down, which it hasn’t,” he said.
Optimal Blue‘s head of corporate strategy Mike Vough said such volatility and rate fluctuations pose considerable challenges for the mortgage industry.
“This includes increased hedge costs prompted by large market swings pushing lenders in and out of their risk policy tolerances, which can ultimately impact mortgage profitability at a time when many lenders are already feeling financial strain. Until volatility stabilizes, lenders must continue to closely monitor their risk positions, update their pricing swiftly, and stay informed on current events.”
Todd Bitter, chief sales officer at UMortgage – which has about 280 sponsored loan officers across 39 active branches – shares the same perception. Due to the uncertainty, lenders were hesitant to fully reprice, despite market moves that could have justified even lower rates last week, he said.
“Lenders held back to see where this was going, and they were kind of right, because look at where we’re at today [Tuesday]. They learned their lesson during COVID with some of the big swings. They were going to sit on the sidelines, give us a little of it back, but really watch to see where it was really headed.”
Bitter noted that during last week’s market volatility, the U.S. 10-year Treasury yield dropped, but mortgage pricing only significantly dipped for one day by 30 basis points before quickly rebounding.
“Usually, when we see the stock market making big sell-offs, we see money flooding into bonds. There’s a flight to safety,” Bitter said. “Now, it’s not really working to our advantage. A lot of money that was cashed out of the market is probably sitting in cash, not in bonds. They (traders) are trying to decide where to put it.”
Leibowitz added that he has seen shorter lock-in periods. On Tuesday, he did a 60-day lock-in on a purchase loan to a Wall Street client, who told him bonds sold by the Treasury weren’t in high demand and premiums were “exploding.”
“This means longer-life assets (like mortgages) are up in rate. He was very keen to lock in something in advance of what might come based on what he sees going on in the interest rate markets,” Leibowitz said.
But borrowers aren’t spooked, LOs say
Bitter said that contrary to his expectations, “we’ve seen no fall-off in mortgage applications.” According to him, sales activity has doubled at UMortgage compared to this time last year, with momentum picking up in late January.
“Things really started picking up about two weeks ago. They continue to pick up. This week, I’ve seen zero fall-off, even though all the headlines are about the stock market and tariffs,” he said.
Metz, who saw rates go down to the mid-6s last week, said that applications began to increase about a month ago due to a set of reasons, and this trend hasn’t ceased with the current market turbulence. Some borrowers are tired of waiting for the right time to get a new home, while others are taking advantage of the situation to refinance in order to consolidate some debt, he added.
“We’re in the Southwest, and we tend to see a lot of seasonality, so applications usually start increasing this time of year,” Metz said. “We’ve also had a few different competing market forces, with low inventory starting to creep up.”
From the borrowers’ perspectives, Bitter believes the jumbo market may be more affected by stock market swings, since many of those borrowers also hold significant equity investments.
“Personally, on paper, I have a very substantial loss, but I’m not worried about it because I’m not touching that money for many years to come,” Bitter said. “But if I were in the market to buy a house, I would probably be a little hesitant because I can’t really sell my equities to put the money down – I’d lose so much.”
Looking ahead, Bitter believes an escalating trade war could ultimately push the Fed to intervene by cutting rates, especially benefiting the refinance market. This would offset the negative effect on the purchase market.
Sean Zalmanoff, founder and chief loan officer at Better Rate Mortgage, told HousingWire that there simply isn’t a historical precedent for last week and this week’s rate movement.
“We’re riding a roller coaster of economic news—tariffs, for example, generally push rates higher by increasing costs and fueling inflation. However, we’re seeing some rate improvement due to the sharp selloff in the stock market. The future remains uncertain…while no one wants to see the market drop 4%, moments like this can present excellent opportunities to lock in favorable rates.”
Sarah Wolak contributed to this article.
