Mortgage rates jump as global tensions flare
Trump’s vow to seize Greenland prompted threats of retaliatory tariffs from the EU, putting pressure on Treasury bonds and sending rates up (and stocks down).
Recent presidential directives and rhetoric appear to be sending mortgage rates on a wild ride.
Rates plummeted mid-month after President Donald Trump announced a mortgage bond buyback plan — but they rose substantially today following Trump's aggressive posturing on foreign affairs.
The 30-year fixed-rate mortgage jumped from 6.07% on Friday, Jan. 16, to 6.21% after the three-day weekend, according to Mortgage News Daily. Both 10-year and 30-year U.S. Treasury bonds were significantly higher on Jan. 20, impacting mortgage rates.
It's quite a turnaround from last week, when the average 30-year rate fell to a three-year low in response to a proposal directing Fannie Mae and Freddie Mac to buy $200 billion in mortgage-backed securities.
Worries about Greenland: The markets appear to be reacting to Trump's talk of seizing Greenland and the fallout from the European Union, Matthew Graham, chief operating officer at Mortgage News Daily, wrote on Jan. 20. Graham noted that along with the potential for retaliatory tariffs from the EU, a Danish pension fund announced it was liquidating its U.S. Treasury holdings.
"While the dollar amount isn't huge, it speaks to the risk that other EU countries could follow suit," Graham said.
Global economic concerns: Tensions escalated over the weekend as Trump took to social media, saying there's "no going back" on a Greenland takeover and threatening to impose tariffs on European allies who oppose his position. The EU is now considering $108 billion in retaliatory tariffs on the U.S. in response to Trump's threats.
Separately, a surge in Japan's borrowing costs led to a selloff in bonds, increasing concerns about a global economic slowdown.
Stock market plunges: The tension around Greenland also led to a significant drop in U.S. stocks. The Dow Jones Industrial Average was down more than 850 points at the end of the Jan. 20 trading session, with most residential real estate stocks trading 3%-6% lower.