Welp, the same movie we saw last year is back in theatres for 2026! And mortgage rates are going to be on a wild ride once again.
On Monday, President Trump threatened tariffs on several European countries for not giving him Greenland.
Then backed off yesterday, announcing he wouldn’t follow through with the tariffs set to start on February 1st.
This is known as the TACO trade, where he makes a threat only to back off shortly thereafter.
In the meantime, mortgage rates are still elevated as a result, but easing somewhat.
What Happened to the Low Mortgage Rates?
In a nutshell, Trump’s threat of new tariffs echoed the trade war stuff we dealt with in early 2025.
That led to higher bond yields due to expected increases in inflation, which trickles down to higher mortgage rates.
Prior to this debacle, the 30-year fixed was at its lowest point in about three years, with many lenders quoting rates deep in the 5s.
Ironically, Trump helped get mortgage rates to those levels thanks to his plan to buy mortgage-backed securities.
But completely erased any of that benefit due to the new trade war, which he has now renounced.
In a Truth Social post yesterday, Trump said, “Based upon a very productive meeting that I have had with the Secretary General of NATO, Mark Rutte, we have formed the framework of a future deal with respect to Greenland and, in fact, the entire Arctic Region.”
“This solution, if consummated, will be a great one for the United States of America, and all NATO Nations. Based upon this understanding, I will not be imposing the Tariffs that were scheduled to go into effect on February 1st.”
The market cheered the news, again somewhat ironically, because it wasn’t even a thing until a few days ago.
Stocks went up, bond yields came down, and mortgage rates eased.
However, mortgage rates remain elevated relative to recent levels and it’s throwing a wrench in some plans.
Namely those looking to complete a rate and term refinance, who have seen their payments rise and become less worthwhile.
Often, refinances come down to fine margins and if rates are now higher, it might not make sense to go through with it.
For home buyers, the math isn’t necessarily a deal breaker. But more on that in a second.
How Much Did Mortgage Rates Go Up?
The big banks I looked at saw their rates increase as follows:
– Was 5.50%, now 5.625%
– Was 5.875%, now 6.00%
– Was 6.00%, now 6.125%
Rates went up about an eighth of a point across the major banks, and in some cases, were maybe .25% higher relative to recent lows.
Sure, it’s not a big difference payment-wise, but there’s a bigger problem that lies within.
And it boils down to sentiment. If prospective home buyers keep hearing this sort of stuff, they might be less willing to take the leap.
Instead, they’ll remain on the fence, lacking the confidence to move forward with the biggest decision of their lives.
After all, who wants to buy a home if they think we might invade Greenland tomorrow, or get into a global spat with Europe and other nations?
Ultimately, you want some sense of stability and calm if you’re going to make a major life decision.
So while the difference in rate might be negligible to some (it still hurts money-wise too), a lot of the damage is in the sentiment.
The 2026 housing market was actually shaping up to be really strong based on early data and rumblings from real estate agents, loan officers, mortgage brokers, etc.
This has the power to derail that momentum and spoil the party.
Don’t Be Surprised If the Tariff Threat Returns
In addition, who’s to say Trump doesn’t come back with another tariff threat?
As I said, we’ve seen this movie before…
Maybe when he gets home from Davos tonight, he’ll wake up tomorrow and decide that the tariffs are back on.
Sure, he apparently had constructive talks and a so-called “framework of a future deal” was ironed out.
But we know impatience will grow without concrete details. And if he doesn’t get what he wants, I certainly wouldn’t rule out another round of tariff threats.
So if you’re floating your mortgage rate, take extreme caution. Rates can change in an instant.
If tariffs are thrown back on the table, we could see mortgage rates spike higher once again.
(photo: Loozrboy)
Before creating this site, I worked as an account executive for a wholesale mortgage lender in Los Angeles. My hands-on experience in the early 2000s inspired me to begin writing about mortgages 19 years ago to help prospective (and existing) home buyers better navigate the home loan process. Follow me on X for hot takes.