San Diego Mortgage Rates: Why I Think They’re Going Up, Not Down

San Diego Mortgage Rates: Why They Might Be Going Up, Not Down

Many homebuyers in the San Diego housing market are holding out hope that mortgage interest rates will drop again — but I don’t see that happening. In fact, all signs point to rates going even higher.

Here’s why:

The 2020–2021 Mortgage Rate Drop Was Artificial

During the pandemic, the U.S. government stepped in to stimulate the economy. Through a combination of quantitative easing and massive purchases of mortgage-backed securities — billions of dollars every month — mortgage rates were artificially pushed into the 2–3% range.

Once those policies were reversed in mid-2021, we saw mortgage rates quickly shoot up into the 6–8% range. That wasn’t a fluke. That was the market correcting itself without artificial intervention.

New Tariffs Mean Higher Inflation

With new tariffs being enacted by Donald Trump, we’re looking at another wave of inflation. Tariffs typically raise the price of imported goods — and when companies pass those costs to consumers, inflation spikes.

If inflation climbs to 10% or higher — a possibility considering the scale of the proposed tariffs — the Federal Reserve may be compelled to raise interest rates again in an effort to stabilize the economy. While mortgage rates are not directly tied to the federal funds rate, they are often influenced by it. However, it’s important to understand that even if the Fed lowers its benchmark rate, mortgage interest rates may not necessarily follow. Market forces, investor sentiment, and inflation expectations all play a role in determining mortgage rate movement.

Inflation, Tariffs, and Recession: A Trifecta

Higher inflation will squeeze household budgets. That, combined with a likely recession and rising unemployment, could reduce home buyer demand — but not enough to cause home prices in San Diego to fall significantly.

Why? Because San Diego still has a serious housing supply issue. Even if demand pulls back slightly, limited inventory will keep prices resilient.

What This Means for San Diego Buyers

Waiting for rates to drop may not be the best move. If you’re a serious buyer, locking in a mortgage now — even at a higher rate — may still make sense. You can always refinance later if rates do drop. But if they rise, you’ll be glad you acted early.

Have questions about the San Diego housing market or want to talk strategy? Reach out anytime. I’m here to help.