“When the US dollar got really strong and rates went up a bunch, we saw a pretty big slowdown in foreign buyers buying,” Germanides said. “But if rates have come in a little bit and the dollar’s weakened a bit, we’ve seen people come back in the market. Your typical foreign buyers are fairly wealthy, normally. So I think there’s a lot of things that play into it, and I don’t know if tariffs will play into them by buying or not buying here.”
How much rates will be lowered remains to be seen. President Trump clashed with Federal Reserve chair Jerome Powell on Friday, with Trump demanding immediate rate cuts while Powell appeared to rule them out. Forecasts on Friday suggested that the central bank may consider cutting rates by up to 100 basis points over the remainder of 2025, while market expectations of an emergency rate cut have also jumped.
Following Trump’s global tariffs, markets anticipate the Fed will cut rates by 100 basis points in 2025 to counter recession fears.https://t.co/vjnxl4B2k0
— Mortgage Professional America Magazine (@MPAMagazineUS) April 4, 2025
A weakened dollar may bring more foreign investment
Fratantoni believes the trade deficits have led to foreign buyers having the resources to invest in mortgage-backed securities (MBS). He notes that having a trade deficit means having a capital surplus, which has led foreign buyers to reinvest that money into US securities, including those backed by mortgages.
While the tariffs may cause some investors to wait, Fratantoni believes the appeal of investing in the US market may be too great to pass up.
“A lot of foreign investors who have always been very much proponents of owning US securities,” Fratantoni said. “And that has benefited the mortgage market and made it one of the most liquid markets in the world. I don’t see that going away, but you know, (the tariffs) could be a potential headwind.”