What Do Tariffs Mean For Homeowners & Homebuyers?

By Nick Garcia

Nick Garcia navigates the complexities of the mortgage industry with analytical precision and strategic foresight. As President and Chief Lending Strategist at Smarter Lending, his mission is to make homeownership accessible and financially sensible for individuals with intricate financial situations.

How will tariffs impact mortgage rates and the housing market? If you’ve been following the news lately, you might be wondering: how exactly do tariffs affect mortgage rates and home prices? It turns out the answer isn’t as straightforward as it might seem, but there’s a lot we can learn from past studies and how the economy reacts to these changes. To give you a clearer picture, let’s break it down below.

What does the research say about tariffs? In 2018, the National Bureau of Economic Research took a deep dive into the impact of tariffs. They looked at data from 151 countries over five decades and found tariffs didn’t really cause inflation in these economies. This is important because a lot of people assume that tariffs automatically drive up prices across the board.

Tariffs tend to lead to an economic slowdown. When it’s combined with a recession (like the one we’re in now), tariffs can actually cause deflation. In certain situations, deflation can be good after a period of high inflation. However, it’s not always great for the economy if it lasts too long.

The connection between tariffs and mortgage rates. Tariffs do cause economic slowdowns, but they don’t necessarily lead to inflation. These slowdowns can actually bring mortgage rates down. This is because when there’s uncertainty in the market, investors tend to pull their money out of stocks and put it into safer investments like mortgage bonds. When more money flows into mortgage bonds, that drives mortgage rates down.

Navigating this can be confusing, but if you want to dive deeper into tariffs, you can learn more about them in this video.

Should homeowners refinance now? If the economy slows down due to tariffs, there’s a good chance the Federal Reserve will react by cutting rates faster than originally expected. The Fed usually acts fast during slowdowns, so they might cut rates more than they planned in 2025.

For homeowners, this is a good opportunity to refinance, especially if you bought a home in the last two years. While it’s hard to know exactly when rates will bottom out, refinancing into a lower rate with little or no upfront cost can still save you money. Even though the costs are usually rolled into your loan, we’ve actually helped clients save more than those costs pretty quickly.

Since timing is everything in a volatile market, we created a way to help you stay ready. Our “strike rate” program alerts you when mortgage rates drop to a level that makes refinancing worth it.

How lumber tariffs might affect construction costs. The biggest concern with tariffs is whether they will affect the cost of construction, particularly lumber. The Biden administration has already imposed an 80% tariff increase on Canadian softwood lumber, which is widely used in homebuilding. If that tariff sticks around, it’s likely going to push up the cost of building homes, which could lead to higher home prices. This will especially impact first-time homebuyers or anyone looking to upgrade to a bigger or more expensive home.

While tariffs don’t automatically lead to inflation, they can cause an economic slowdown that ultimately lowers mortgage rates. Don’t also hesitate to call me at +1 (509) 960-5368 or send an email to nickg@smarterlending.com for other questions you might have. I’m always happy to help.