Mortgage rates in the U.S. slipped below 6% this week for the first time in nearly three years, after President Donald Trump ordered Fannie Mae and Freddie Mac to buy up to $200 billion of mortgage-backed securities. The move is aimed at making home loans cheaper ahead of the midterm elections.
The average 30-year fixed mortgage rate fell to 5.99% on Thursday, January 9, from 6.21% a day earlier, according to real-time housing-market data. That is the lowest level since early 2023 and a sizable swing in a market that usually shifts by inches, not jumps.
“This is about making the American Dream affordable again,”
said a senior White House official, speaking on background.
“We’re using the tools we have to bring rates down now, not in some distant future.”
Trump unveiled the directive on social media late Wednesday, January 8, instructing the two government-sponsored enterprises to tap cash reserves built up since their 2008 bailout. Instead of focusing solely on backing new mortgages, they are now being told to buy existing mortgage bonds in the secondary market.
“Fannie and Freddie will start buying mortgage bonds again – BIG TIME – and rates will come DOWN,”
the president wrote, calling the step
“good news for homebuyers and families.”
A direct line from the White House to Main Street
The basic idea is straightforward: Fannie and Freddie become large buyers of mortgage-backed securities, driving up prices for those bonds. Higher bond prices mean lower yields, which in turn tend to pull down retail mortgage rates for borrowers.
Bill Pulte, the Trump-appointed director of the Federal Housing Finance Agency and chairman of both GSE boards, quickly lined up behind the plan.
“We are on it,”
Pulte posted online.
“Our mission is to reduce borrowing costs for American families and support housing affordability.”
The speed of the endorsement signaled that regulators would not push back. But the fine print is thin. The administration has not released a timetable for the purchases, the types of bonds that will qualify, or an exit strategy if conditions change.
“That’s what worries me,”
said a former FHFA lawyer who worked on GSE reform after the financial crisis.
“Once you go down the path of using these balance sheets as a political tool, it’s very hard to stop.”
Markets cheer — cautiously
Bond markets reacted almost immediately. Traders said agency mortgage spreads over Treasurys tightened by about 10 basis points after the directive, a notable move for a typically slow-moving corner of fixed income.
“Was this all Trump? No,”
said Scott Buchta, head of fixed income strategy at Brean Capital.
“Rates were already biased lower as inflation cooled and long bonds rallied. But this announcement definitely added fuel.”
Buchta estimates that if the full $200 billion program is carried out, it could shave as much as a quarter of a percentage point off mortgage rates.
“We may have already seen a big chunk of that in the first day,”
he said.
“The question is whether lenders decide to hold some of that spread for themselves.”
Early signs suggest at least part of the savings is reaching borrowers. Mortgage brokers reported a wave of inquiries from potential buyers and from homeowners with rates above 6% who are suddenly eyeing a refinance.
“I’ve had clients on the fence for months,”
said Laura Martinez, a loan officer in Phoenix.
“Today, my phone finally lit up. People saw 5.99% and said, ‘Okay, now I move.’”
Modest relief, not a cure for the housing crunch
For households, the rate move translates into real but modest relief.
On a $3,000 monthly mortgage budget, buyers have gained roughly $14,000 in additional purchasing power over the past month and about $30,000 since last summer, when rates hovered near 6.8%. A borrower with that budget can now afford a home of about $480,000, up from roughly $466,000 at December’s rates.
For a median U.S. home priced around $433,000, monthly payments at today’s rate are about $2,537, down from roughly $2,720 six months ago.
“It matters at the margin,”
said Jake Krimmel, senior economist at Realtor.com.
“But this is not a silver bullet for affordability. Prices are still high, inventory is still tight, and many renters simply don’t have the down payment.”
First-time buyers, in particular, may not feel much immediate benefit.
“Lower rates help if you can already play the game,”
Krimmel said.
“If you’re locked out by savings or credit scores, a one-time subsidy to mortgage bonds won’t magically open the door.”
Refinancing, by contrast, is likely to surge among homeowners who took out loans above 6% in the past two years. That could free up cash for some households, but it concentrates the gains among people who already own property.
Old risks in a new wrapper
Behind the political selling points sits a familiar set of risks.
Under the directive, Fannie and Freddie will once again build up large investment portfolios of mortgage-backed securities, instead of primarily guaranteeing loans and passing securities straight through to private investors. The planned $200 billion in purchases would be their biggest portfolio expansion since before the 2008 crisis.
“That is exactly the business model that nearly blew them up last time,”
said a veteran housing analyst at a major Wall Street bank.
“You are concentrating credit and prepayment risk on two entities that the taxpayer ultimately stands behind.”
The securities involved are existing bonds already trading in the market. Their risk profile will depend on which vintages and loan pools the GSEs choose to buy, but policymakers have not released any selection criteria.
Drawing down cash reserves will leave the GSEs with less liquidity and more exposure to the next housing downturn or interest-rate spike. If delinquencies climb or rates move sharply, they could face mark-to-market hits reminiscent of the late 2000s.
“What’s being sold as a win for homebuyers today could be a bill for taxpayers tomorrow,”
the former FHFA lawyer warned.
A challenge to the Fed’s shadow
The decision also muddies the line between fiscal policy, housing policy, and monetary policy.
Since the financial crisis, large-scale mortgage-bond buying has largely belonged to the Federal Reserve, which accumulated roughly $2 trillion of mortgage-backed securities through quantitative easing and emergency pandemic programs. Those efforts came with formal frameworks, voting records, and detailed communication.
Trump’s plan, by contrast, arrived via a social media post and a brief follow-up from his regulator.
“This is the White House trying to run mini-QE through the back door,”
said a former Fed staffer.
“It’s not illegal, but it’s a clear attempt to influence financial conditions in a way that traditionally belongs to the central bank.”
The Fed has not commented publicly, but people close to the central bank say officials are watching for signs that political pressure could complicate their own rate decisions.
“If the executive branch starts using Fannie and Freddie every time it wants cheaper mortgages, you have a real governance problem,”
the former staffer said.
Politics today, reform tomorrow
The directive lands in the middle of an election cycle in which housing costs regularly top voter concerns.
“It lets the president say, ‘I did something big on mortgages,’”
said a Democratic congressional aide.
“But it also hands us a potent oversight question: are we turning Fannie and Freddie back into the same risk machines they were before 2008?”
For more than a decade, Congress has debated what to do with the GSEs, which remain in federal conservatorship. Some lawmakers argue for fully privatizing them. Others want them folded more clearly into the government and treated as explicit public utilities.
This latest move leans in the opposite direction. It deepens their role as flexible policy instruments and makes any clean exit from conservatorship harder to design.
“The longer GSEs are used as a political Swiss Army knife, the less believable any talk of genuine reform becomes,”
the Wall Street housing analyst said.
For now, many buyers see a rate that starts with a “5” instead of a “6” and a bit more breathing room in the monthly budget. The longer-term question is whether this short-term rate sugar high will once again be followed by a hangover—for taxpayers, for the Fed, and for the broader housing market.
