Tariffs Push US Mortgage Rates Down—But Homebuyers Still Face Crushing Affordability Crisis

US Mortgage rates dropped Thursday after US President Donald Trump's sweeping tariffs announcement as markets brace for impact on global trade. According to the Federal Reserve Bank of St. Louis, the 30-year fixed mortgage rate fell to 6.64% on 3rd April, the lowest since October 2024. Meanwhile, the 15-year fixed loan rate declined to 5.82%.

US markets lost £1.53 trillion ($2 trillion) in value on the tariff announcement as benchmark indexes fell by over 4% in a single trading session. The equity selloff led investors to the bond market, causing bond yields to drop. Note that mortgage rates loosely follow the moves of the 10-year US Treasury yield.

While the drop in mortgage rates comes when the busy spring season kicks off, housing affordability remains a challenge for Americans.

Monthly Mortgage Payments Reached a Record High in March

According to a Redfin report, the average US homebuyer's monthly mortgage payments in March reached a record high of £2,151 ($2,802).

'Sale prices are up 3.4% year over year, and the weekly average mortgage rate is 6.65%, near its lowest level since December but more than double pandemic-era lows,' per the report.

Despite the latest drop in mortgage rates, almost 94 million households cannot afford a £307,202 ($400,000) home. According to the National Association of Home Builders, the median price of a new home was roughly £353,282 ($460,000) in 2025. The report estimated that Americans need a minimum annual income of £47,498 ($61,847) to buy a £153,601 ($200,000) home at a 6.5% mortgage rate.

That means only 52.87 million US households with annual incomes up to that threshold could afford a home priced up to $200,000 at a 6.5% mortgage rate.

Sluggish Homebuyer Response Despite Jump in Listings

Despite an increasing supply of residential properties, the supply isn't at the lower end of the price point that most people can afford.

'Supply is picking up; a lot of people I've spoken to over the last year or two are calling, saying they're ready to list their house,' said Matt Ferris, a Redfin agent. 'Some believe we're at the top of the market, and they want to get top dollar for their house. Here in the D.C. area, some people are selling because they're worried about losing their government job or because they want to buy closer to the city due to in-office policies.'

Realtor.com data revealed a 10% jump in March listings, but homes were sitting on the market longer.

'The high cost of buying coupled with growing economic concerns suggest a sluggish response from buyers in early spring. We're seeing a market that's rebalancing, offering more choices for shoppers,' wrote Danielle Hale, chief economist for Realtor.com, in a release. 'Recent improvements in mortgage rates bode well for the later spring and early-summer housing season, as long as economic concerns settle and don't knock buyers off course.'

While lower mortgage rates typically drive home sales as the cost of homeownership declines, many potential homebuyers might avoid buying a home if they are worried about job loss and its negative impact on their investments amid the growing market volatility and poor economic forecasts on consumer prices, inflation, unemployment rates, and US GDP growth.

'It remains to be seen whether relief from mortgage rates will spur buyers to make a move in 2025 or if the broader economic conditions will slow things down,' said Joel Berner, senior economist at Realtor.com.