Trump’s Mortgage Bond Plan Sends Rates Low… for now
Housing affordability will be one of the administration’s top priorities in 2026 as President Donald Trump seeks to lower mortgage rates.
In a recent social media post, Trump announced that he is “directing” his representatives at Fannie Mae and Freddie Mac to buy $200 billion in mortgage-backed securities, or MBS, also called “housing bonds.” When the demand for MBS increases, the price of the bond increases, but the yield – the interest paid to investors – decreases, pulling down the mortgage rates and, in turn, reducing the cost of borrowing and monthly payments.
The strategy worked, at least for now. Mortgage rates fell by about 0.20 percent due to the January 8 position release.
The sudden rate drop was welcome news to some home buyers, who wasted no time in taking advantage of the dip. According to the Mortgage Bankers Association, mortgage applications rose nearly 30% week over week on a seasonally adjusted basis during the week ending Jan. 9. Landlords also got in on the action, with refund requests up 40%.
The question now is whether this decline is sustainable or a one-time decline. Many experts believe that the impact of bond purchases will likely be limited.
Joel Berner, chief economist at Realtor.com, tells Money in an email that the drop in prices is “probably a sharper reaction than we’ll see in the coming days and weeks. Prices will likely continue to fall, but not at this rapid daily pace.”
How low could mortgage rates go?
Bill Banfield, chief business officer at Rocket Mortgage, expects rates to drop 0.15- to 0.25-percent from their previous levels, with other mortgage experts citing a similar range. If so, rates may not go much below their current average of around 6%.
The reason they are not backing down on the sale of mortgage bonds, said Banfield, is that, although the $200 billion is significant, it only represents 15% of the mortgage market. Whether Fannie and Freddie make a lump sum investment or make a series of purchases over time, lenders already have a purchase price for their rates.
Still, these low rates provide a much-needed boost to some prospective homebuyers. According to a report from brokerage Redfin, potential buyers gained nearly $14,000 in buying power last month as rates edged closer to 6%. Since mid-summer, when mortgage rates began to drop from about 6.8% to their current level, buyers have gained $30,000 in purchasing power.
“It’s going to take a while, but affordability will slowly get back on track,” Banfield said.
Despite these recent developments, there is no guarantee that Fannie and Freddie’s mortgage bond purchases it will lead to a long-term decline. Indeed, since Trump’s social media posts have sent rates plummeting, they noted again, although they remain below the average seen two weeks ago.
Any further rate cuts will depend on other economic factors, including moves in the 10-year Treasury yield, inflation, the labor market and the strength of the overall US economy, all of which could push rates either way. Possible legal action against Federal Reserve Chairman Jerome Powell could also affect interest rates, raising them.
The impeachment of the Fed chairman will destroy confidence in the central bank’s independence from political influencewhich may result in economic instability, higher inflation and investors’ demand for higher bond yields to compensate for increased economic risk.
Mortgage rates and monthly payments are only part of the total cost of home ownership and home ownership. Berner notes that homeowners insurance, property taxes and HOA fees have also increased in the past few years and continue to do so. Home prices are also rising, although at a slower pace than in previous years. These higher costs could dampen any significant improvement in housing affordability due to lower mortgage rates.
“It’s important to take a closer look at the cost of home ownership before buying, not just jump at the sudden drop in mortgage rates,” says Berner.
More from Mali:
Will Mortgage Rates Fall in 2026? Here’s What Real Estate Experts Predict
Housing Market Forecast: Will Home Prices Finally Fall in 2026?
Buying a House? This overlooked step can save you $1,200 a year
