Mortgage Rates Drop to 6.89% After Trump’s Quick Reversal on Major New Tariffs

Mortgage rates dipped modestly this week after financial markets reacted with relief when President Donald Trump quickly suspended harsh new tariffs he had proposed against Canada and Mexico.

The average rate on 30-year fixed home loans dropped to 6.89% for the week ending Jan. 30, down from 6.95% the prior week, according to Freddie Mac. Rates averaged 6.64% the same week last year.

“Even though rates are higher compared to last year, the last two weeks of purchase applications are modestly above what we saw a year ago, indicating some latent demand in the market,” says Freddie Mac Chief Economist Sam Khater.

The modest decline in mortgage rates follows short-lived panic in financial markets after Trump announced massive new tariffs on Canada and Mexico over the weekend. But he suspended them on Monday after securing border security guarantees from the two U.S. neighbors.

Tariffs are viewed as inflationary, and if imposed, the new duties could have quickly driven up yields in the long-term bond markets that influence mortgage rates. Instead, those markets reacted with relief to the rapid pause, trending lower over the week.

“The recent announcement of, then pause in, tariffs had the potential to jostle the market confidence, which could have negatively impacted mortgage rates, but the timing managed to keep things rather uneventful,” says Realtor.com® senior economic research analyst Hannah Jones.

Despite the modest relief this week, mortgage rates have now remained close to 7% since the beginning of the year, frustrating expectations that they could fall closer to 6% over the winter months.

“Rates remained stubbornly high in recent weeks as markets anticipated and adjusted to the seemingly ever-changing economic environment,” says Jones.

Mortgage rates tend to move in tandem with the yields on long-term bonds, which change as investors adjust their expectations about the economy’s future, inflation, and government deficits.

“The 10-year Treasury yield moved lower over the last couple of weeks, which could allow mortgage rates to fall as well,” says Jones. “However, for the time being, high mortgage rates, stubborn home prices, and general economic uncertainty mean that many would-be home shoppers are staying on the sidelines.”

Continued softness for home prices

The Realtor.com economic research team’s weekly housing market update shows that for the week ending Feb. 6, the median list price of homes on the market nationally was down 1% from the same week last year.

It marked the 36th week in a row in which the national median home list price was flat or falling from the corresponding week last year, a stretch that dates to the beginning of June 2024.

As elevated mortgage rates dent buyer demand and homes sit longer on the market, sellers are also increasingly turning to price reductions.

The number of listings with price reductions rose 29% this week compared with the same period last year, with the overall share of listings with price reductions up 0.5%.

Despite the softness in price growth, home prices remain close to record highs, which, combined with high mortgage rates, is a significant pain point for buyers.

Listing activity and supply on the rise

The number of new listings hitting the market jumped 4.2% this week compared with a year ago, a sign that changing life and career circumstances are increasingly pushing sellers to list despite elevated mortgage rates.

New listing activity has jumped annually for each of the past four weeks, and so far this year, new listings are up 7.1% compared with the same period in 2024, setting up a more buyer-friendly start to the year.

The total supply of homes listed for sale is also rising, up 26.7% this week from a year ago.

With supply growing faster than demand, homes are staying on the market longer. Median days on the market slowed dramatically this week, with the typical home spending seven more days on the market compared with last year.

“Though housing costs remain eye-wateringly high, for-sale inventory continues to build, offering home buyers more options. Climbing inventory levels have created a bit more slack in the housing market, which is important for market balance,” says Jones. 

“Easing mortgage rates and climbing housing supply will both be important in improving housing affordability in the U.S.,” she adds.