Hagen said brokers should keep a close eye on that ruling. If the government has to repay tariffs, it may be forced to borrow money to do that. Hagen said this could push Treasury rates higher, undoing the mortgage rate drop the market saw on Friday.
“The big question is, what happens to Treasury rates?” he said. “We were just waiting for the SCOTUS decision about whether the tariffs are legal or not. If they weren’t legal, there’d be a hole in the budget. We’d have to borrow more, and presumably Treasury rates would go up in response. So, there are all these reasons why we could see Treasuries going up over the next year.”
Because the window for lower rates may be shorter, expect many rate locks to be set, thanks to this Friday’s rate drop. As for further rate drops, Hagen thinks the Fed is going to play a part, especially after the new chair takes over in May.
“I think the Fed is the next big shoe to drop,” Hagen said. “We totally expect that Trump is going to get his guy at the Fed, and he’s going to drive interest rates pretty much as low as possible. We’re looking for the Fed to cut rates and for that to have an almost immediate spillover effect, maybe lowering volatility even further, and potentially tightening the mortgage spreads further.
