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Mortgages

Mortgage Rates

Trump Wants the Government to Buy Mortgages. Will That Lower Rates?

Illustration featuring Freddie Mac and Fannie Mae institutions

Money; Getty Images

Housing affordability will be one of the administration's main priorities in 2026 as President Donald Trump seeks to lower mortgage rates.

In a recent social media post, Trump announced he's "instructing" his representatives at Fannie Mae and Freddie Mac to purchase $200 billion in mortgage-backed securities, or MBS, which are also referred to as "mortgage bonds." When demand for MBS increases, the bond price rises, but the yield — the interest paid to investors — falls, pulling mortgage rates lower and, in turn, reducing borrowing costs and monthly payments.

The strategy has worked, at least for now. Mortgage rates dropped by about 0.20 percentage points due solely to the release of the post on January 8.

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The sudden rate decline was welcome news to some homebuyers, who lost no time taking advantage of the dip. According to the Mortgage Bankers Association, mortgage applications increased by nearly 30% week-over-week on a seasonally adjusted basis during the week ending Jan. 9. Homeowners also got in on the action, with refinance applications up 40%.

The question now is whether this decrease is sustainable or a one-time decline. Most experts believe the impact of the bond purchase will likely be limited.

Joel Berner, senior economist at Realtor.com, tells Money in an email that the drop in rates "is likely a sharper reaction than we will see in the coming days and weeks. Rates will likely continue to dip, but not at this rapid daily pace."

How low could mortgage rates go?

Bill Banfield, chief business officer at Rocket Mortgage, expects rates to settle at a 0.15- to 0.25-percentage point reduction from their previous levels, with most other housing experts citing a similar range. If that's the case, rates may not move significantly below their current average of about 6%.

The reason they may not move lower solely on the sale of mortgage bonds, says Banfield, is that, although $200 billion is significant, it represents only about 15% of the mortgage market. Regardless of whether Fannie and Freddie invest the full amount or make a series of purchases over time, lenders have already priced in the purchase into their rates.

Still, these lower rates provide a much-needed boost for some prospective homebuyers. According to a report from brokerage Redfin, prospective buyers have gained about $14,000 in purchasing power over the last month as rates moved closer to 6%. Since mid-summer, when mortgage rates began to decline from around 6.8% to their current level, buyers have gained $30,000 in buying power.

"It's going to take a while, but affordability is coming a little better back into line," Banfield says.

Despite this recent improvement, there's no guarantee that Fannie and Freddie's mortgage bond purchase will lead to a prolonged downward trend. Indeed, since Trump's social media post sent rates tumbling, they've ticked back up, although they remain below the average seen just two weeks ago.

Any additional rate declines will depend on other economic factors, including the movement of 10-year Treasury yields, inflation, the labor market and the overall strength of the U.S. economy, all of which could push rates in either direction. Potential legal action against Federal Reserve Chair Jerome Powell could also affect interest rates, pushing them higher.

An indictment of the Fed chair would erode confidence in the independence of the central bank from political influence, potentially resulting in economic instability, higher inflation and investor demand for higher bond yields to compensate for the increased economic risk.

Mortgage rates and monthly payments are only part of the total cost of homeownership and housing affordability. Berner notes that homeowners' insurance, property taxes and HOA fees have also increased over 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 dull any significant improvement in housing affordability due to lower mortgage rates.

"It's important to take a holistic look at the expenses of homeownership before making a purchase, not just to jump at a sudden decrease in mortgage rates," Berner says.

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