Just days after mortgage rates hit a three-year low, there was an almost immediate surge in applications, with fresh trade tensions threatening to undo that progress.
Rates on 30-year mortgages rose 14 basis points to an average of 6.21% on Tuesday morning, following a new escalation in the standoff between President Trump and European leaders over the future of Greenland, according to Mortgage News Daily.
After receiving repeated rebukes in his attempts to annex the Danish territory, Trump threatened to impose punitive 10% tariffs on eight European countries starting February 1, and eventually increased the tariffs to 25%. European leaders are now considering their response.
Selling started in the stock and bond markets on Tuesday due to increasing geopolitical tensions. The S&P 500 sank 1.5%, while the 10-year Treasury yield – which closely tracks mortgage rates – rose more than 4 basis points to 4.275%.
Read more: What is the 10-Year Treasury Note and How Does It Affect Your Finances?
Many factors are involved in determining mortgage rates, including bond yields, market volatility, and demand for mortgage-backed securities. In recent weeks, low yields and Trump’s mortgage bond-buying directive helped push mortgage rates near 6%, the lowest level since the end of 2022.
Tuesday’s volatility effectively reversed those recent gains, sending mortgage rates back to levels where they were during most of the fall.
Doug Wall, a senior loan advisor at Guild Mortgage in Hilton Head Island, S.C., is keeping an eye on developments in Greenland, as well as the sudden rise in Japanese bond yields that is also hitting Treasuries.
“This Greenland thing and this Japan thing are two wildcards that came out of nowhere,” Wall said. “It shows you that all the economies of the world are connecting.”
If the current rate trend continues, it threatens to stall the housing market’s momentum toward stabilization. After three consecutive years of low home sales, many economists and market experts expected 2026 to mark the beginning of a turning point toward a more normalized market, provided mortgage rates gradually decline and volatility subsides.
Read more: Mortgage Rate Prediction for the Next 5 Years
“Another trade war is the last thing we need for the housing market,” Colin Robertson, founder of The Truth About Mortgages, posted on Twitter.
For now, Wall, a 25-year mortgage industry veteran, is reminding troubled customers to keep a “long-term perspective” — despite the latest geopolitical developments, rates today are down about a percentage point from a year ago, which translates to a savings of about $330 per month on a $400,000 mortgage.
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