US mortgage rates have dropped to their lowest level since October due to a rise in government bond prices amid an escalating trade war. This has led to an increase in home purchase applications to their highest level in over a year.

According to data from the Mortgage Bankers Association, the average rate on a 30-year mortgage fell by 9 basis points to 6.61% for the week ending April 4. Rates on 30-year jumbo and 15-year fixed mortgages also saw a decrease.

As borrowing costs have become more affordable, there has been a significant 35% increase in refinancing activities, reaching levels not seen since October. Additionally, there has been over a 9% rise in mortgage applications for home purchases for the sixth consecutive week.

Mortgage rates are closely tied to the yields of 10-year Treasury notes, which dropped below 4% the previous week for the first time since before the election. Concerns over a potential recession were triggered by President Donald Trump's tariff announcements, leading to a stock market decline.

Even though strong purchase activity may alleviate worries of a sudden drop in consumer demand, economists warn of a possible slowdown in economic activity due to tariffs potentially boosting inflation and hindering investment.

The Mortgage Bankers Association's weekly survey, in operation since 1990, collects data from mortgage bankers, commercial banks, and thrifts. This data accounts for over 75% of all retail residential mortgage applications in the US.