Trump Introduces Fresh Plan to Cut Mortgage Rates. Potential Impacts for Prospective Homebuyers.

Trump Orders Major Mortgage Bond Purchases

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Former President Donald Trump has announced a plan for Fannie Mae and Freddie Mac to acquire up to $200 billion in mortgage-backed securities, a strategy he believes will help reduce mortgage interest rates.

Main Points

• Trump has directed Fannie Mae and Freddie Mac to purchase as much as $200 billion in mortgage bonds, aiming to lower borrowing costs for homebuyers.
• The overall impact of this initiative on the vast $11 trillion mortgage bond market remains uncertain.

By instructing these government-backed mortgage companies to buy a large volume of mortgage bonds, Trump hopes to make home loans more affordable for Americans who have been unable to purchase homes due to high rates.

On his Truth Social platform, Trump stated: “I am instructing my Representatives to BUY $200 BILLION DOLLARS IN MORTGAGE BONDS. This will drive Mortgage Rates DOWN, monthly payments DOWN, and make the cost of owning a home more affordable.”

William Pulte, Director of the Federal Housing Finance Agency, confirmed via social media that Fannie Mae and Freddie Mac will proceed with these purchases.

The market reacted swiftly, with the average 30-year mortgage rate dropping to nearly 6%—the lowest level seen since early 2023, according to Mortgage News Daily.

How This Affects You

Lower mortgage rates can make it easier to buy or refinance a home, and they also influence home prices, consumer spending, and the broader economy.

Typically, when you take out a mortgage, your lender may sell it to Fannie Mae or Freddie Mac. These organizations bundle the loans into mortgage-backed securities, which are then sold to investors. This process helps keep funds available for new loans and, ideally, keeps mortgage rates stable. The new directive for Fannie and Freddie to buy more of these bonds is intended to push rates even lower.

Assessing the $200 Billion Plan

The mortgage-backed securities market is enormous—valued at about $11 trillion, according to LPL Financial. While a $200 billion purchase is substantial, it may not be enough to create a dramatic shift in the market by itself.

Fannie Mae and Freddie Mac have already been increasing their holdings of these securities, with their portfolios growing by over 25% since June and reaching nearly $234 billion by October.

The goal of these purchases, including the additional buying ordered by Trump, is to bring down mortgage rates, which have remained above 6% for several years. Although rates have eased somewhat recently, they are still more than twice as high as they were earlier in the decade.

Mike Simonsen, chief economist at Compass, commented on X: “Fannie and Freddie have already loaded up their balance sheets with MBS. Trump wants more of this. Seems like it'll help rates, gotta wonder how sustainable it is.”

Expert Opinions and Additional Considerations

Some experts remain cautious. Joel Berner, senior economist at Realtor.com, described the potential effects as “modest and short-lived,” pointing out that the Federal Reserve previously purchased $2 trillion in mortgage-backed securities—ten times the scale of Trump’s plan. Berner also warned that even if rates fall, increased demand could drive home prices higher, offsetting any benefit from lower rates.

Another factor is the administration’s separate proposal to return Fannie Mae and Freddie Mac to private ownership. Although both companies are publicly traded on the over-the-counter market, the U.S. Treasury has held a controlling interest since the 2008 financial crisis. Some analysts warn that privatizing these firms could actually raise mortgage rates, since government backing currently helps keep borrowing costs lower.

This is Trump’s second major housing policy announcement this week. Earlier, he proposed a plan to prohibit large investors from buying single-family homes, another effort to make housing more accessible in a market where limited supply and high prices have sidelined many buyers.