The landscape for mortgage rates shifted dramatically after President Donald Trump said on Jan. 8 that he’s directing representatives to purchase $200 billion in mortgage-backed securities from Freddie Mac and Fannie Mae in order to drive mortgage rates lower.
“I am giving special attention to the Housing Market,” Trump wrote on Truth Social. “This will drive Mortgage Rates DOWN, monthly payments DOWN, and make the cost of owning a home more affordable.”
Freddie Mac and Fannie Mae don’t originate mortgage loans; rather, they purchase loans from lenders and compile them into mortgage-backed securities (MBS), which are sold to investors. Trump said that his reluctance to sell Fannie Mae and Freddie Mac during his first term led to a $200 billion cash windfall with the agencies that will now be used to purchase additional mortgage-backed securities and increase affordability.
William Pulte, director of the Federal Housing Finance Agency, confirmed the announcement in a post on X.
“We are on it, Mr. President,” Pulte wrote.
“It’s been very messy so far,” Graham said.
“A mere [$50 billion] in additional MBS buying led to a 50bp (0.50%) tightening of mortgage rates to Treasuries over the past 7 months. Even after diminishing returns, it’s not outrageous to think another 50bp is possible.”
Mortgage rates aren’t likely to fall much further than they currently have, Graham noted, due to the finite nature of the bond buying commitment and the lack of a purchasing timeline.
Bankrate housing market analyst Jeff Ostrowski told The Epoch Times in a statement that government bond buying injects stability and certainty into the mortgage market, which drives rates lower.
“Mortgage rates reacted immediately to President Trump’s announcement, but it’s unclear whether $200 billion would move the needle,” Ostrowski said.
“While that sounds like a lot, for perspective, the Fed still holds $2 trillion in mortgage-backed securities, even after stopping its purchases and selling off its holdings over the past couple of years.”
Stock prices for publicly traded homebuilders also jumped on the president’s news. Lennar Corporation was up 7.5 percent, Toll Brothers was up 7.2 percent, and D.R. Horton, Inc. rallied 6.8 percent in intraday trading.
