Just days after mortgage rates hit a three-year low, sparking a near-instant surge in applications, fresh trade tensions are threatening to undo that progress.
Rates on a 30-year mortgage jumped 14 basis points to an average of 6.21% on Tuesday morning, according to Mortgage News Daily, following new escalations in the standoff between President Trump and European leaders over the future of Greenland.
After being repeatedly rebuffed in efforts to take control of the Danish territory, Trump threatened to impose punitive 10% tariffs on eight European nations starting Feb. 1, and eventually ratchet the tariffs up to 25%. European leaders are now weighing their response.
The rising geopolitical tensions sparked a stock and bond market sell-off on Tuesday. The S&P 500 sank 1.5%, while the 10-year Treasury yield — which mortgage rates closely track — 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?
Multiple factors, including bond yields, market volatility, and demand for mortgage-backed securities, go into determining mortgage rates. In recent weeks, lower yields and a mortgage bond-buying directive from Trump helped push mortgage rates to close to 6%, the lowest level since late 2022.
Tuesday’s volatility effectively reversed those recent gains, bringing mortgage rates back in line with where they were for most of the fall.
Doug Wall, a senior loan consultant at Guild Mortgage in Hilton Head Island, S.C., has been watching the Greenland developments, as well as a sudden rise in Japanese bond yields that’s also been affecting Treasuries.
“This Greenland thing and the Japan thing are two wildcards that came out of nowhere,” Wall said. “It just shows you that the world’s economies are all connecting.”
If the current rate trend holds, it threatens to stall the housing market’s progress toward unfreezing. After three straight years of low home sales, many economists and market experts expected 2026 to be the beginning of a turning point toward a more normalized market, provided mortgage rates moved gradually lower and volatility eased.
Read more: Mortgage rate predictions for the next 5 years
“Another trade war is the last thing the housing market needed,” Colin Robertson, founder of The Truth About Mortgage, posted on X. “We started off strong w/ mortgage apps surging, but the Greenland situation could crush the momentum yet again.”
For now, Wall, a 25-year mortgage industry veteran, is reminding jittery clients to keep “a long-term perspective” — despite the latest geopolitical developments, rates today are down nearly a percentage point compared to a year ago, which translates to around $330 a month in savings on a $400,000 mortgage.