| Key Points: – Mortgage rates surged to 7.1%, the highest level since February, following a sell-off in bonds. – The bond market experienced one of its sharpest weekly moves since the early 1980s. – Rising rates could weigh on economic growth, housing, and investor sentiment heading into Q2. |
Mortgage rates jumped sharply on Friday, climbing to 7.1% for the 30-year fixed loan — their highest level since mid-February — as bond markets reeled from tariff-induced volatility. The move marked a 13-basis-point spike in a single day and capped what analysts are calling one of the most dramatic weeks in the Treasury market since 1981.
The spike followed a roller-coaster week in rates, largely driven by President Trump’s sweeping new tariffs on dozens of countries. Yields surged mid-week when the full tariff regime kicked in, then dipped after a partial rollback was announced, only to rebound on Friday. Notably, 10-year yields jumped 66 basis points from Monday’s lows, a move rarely seen outside of crisis periods.
Mortgage rates tend to track the 10-year Treasury, which helps explain the immediate impact on home financing costs. But broader bond market dislocations are now raising alarm bells across asset classes.
Matthew Graham, COO at Mortgage News Daily, described the moment as historic. “Unless your career began before 1981,” he noted, “this was likely the worst week you’ve ever seen in terms of 10-year yield volatility.” Traders and economists alike are grappling with the inflationary potential of tariffs and their longer-term implications for rates, risk, and the real economy.
Higher mortgage rates couldn’t come at a worse time for the housing market. The spring season is typically the most active for homebuying, but consumers now face steeper monthly payments just as concerns mount about job security and cost-of-living pressures. A Friday report from the University of Michigan showed consumer inflation expectations jumped from 5% to 6.7% — the highest since 1981.
In parallel, investors are also digesting early signs of an economic slowdown. GDP estimates for Q1 have been revised downward, and analysts note that consumer spending, outside of motor vehicles, was modest in March. Retail data released Friday did beat expectations, but economists caution that pre-tariff panic buying may have temporarily inflated the numbers.
For small-cap investors, the impact of higher rates is often magnified. These companies typically rely more heavily on short-term debt and floating-rate loans, making them more vulnerable to rising borrowing costs. Additionally, a potential slowdown in consumer demand could disproportionately impact the growth assumptions embedded in many small-cap valuations.
The bond market sell-off has also drawn attention to broader inflation expectations, with some economists now questioning whether the Federal Reserve will have the flexibility to cut rates as previously anticipated. If rate cuts are delayed or pared back, sectors sensitive to interest rates — from housing to tech — could feel the strain.
As the dust settles, markets will look to upcoming Fed commentary and earnings season for signals. But for now, mortgage rate watchers and equity investors alike are navigating a landscape that’s become far more uncertain in just one week.