President Donald Trump has announced a major move aimed at lowering mortgage rates and easing the cost of buying a home in the United States. In a post on Truth Social, Trump said he has instructed his “representatives” to purchase $200 billion worth of mortgage bonds, arguing that the step would reduce borrowing costs and make homeownership more affordable for Americans.
According to Trump, the funds for this initiative would come from Fannie Mae and Freddie Mac, the two government-controlled mortgage finance companies that play a central role in the U.S. housing market. He said the firms are now worth “an absolute fortune” and have enough cash to support such large-scale purchases.
“This will drive mortgage rates down, monthly payments down, and make the cost of owning a home more affordable,” Trump wrote, framing the move as part of a broader effort to revive what he calls the “American Dream.”
Why Mortgage Rates Matter So Much Right Now
Mortgage rates have remained stubbornly high, even as inflation has cooled and the Federal Reserve has eased policy in recent years. For many households, elevated mortgage rates are the single biggest barrier to buying a home.
Higher mortgage rates mean:
- Larger monthly payments
- Higher total interest costs over the life of a loan
- Fewer buyers qualifying for mortgages
As a result, housing demand has slowed, home sales remain weak, and affordability has reached levels not seen in over a decade.
Trump’s announcement directly targets this problem by attempting to influence the market for mortgage-backed securities, which play a key role in determining mortgage rates.
How Buying Mortgage Bonds Could Lower Mortgage Rates
Mortgage bonds are securities backed by home loans. When demand for these bonds rises, their prices increase, and yields fall. Lower yields often translate into lower mortgage rates for consumers.
Traditionally, the Federal Reserve has been the largest buyer of mortgage bonds, especially during times of economic stress. During the pandemic, the Fed bought hundreds of billions of dollars in these securities, helping push mortgage rates to record lows.
Trump’s proposal would shift part of that role to Fannie Mae and Freddie Mac. If the two firms begin buying large amounts of mortgage bonds:
- Bond prices could rise
- Mortgage yields could fall
- Lenders could offer lower mortgage rates
Market participants reacted quickly to the announcement. Shortly after Trump’s post, the gap between mortgage bond yields and U.S. Treasury yields narrowed, suggesting investors believe the plan could have at least some impact on mortgage rates.
Limits to How Much Mortgage Rates Can Fall
While the idea could help, experts caution that mortgage rates are influenced by many factors, not just mortgage bond purchases.
Key drivers of mortgage rates include:
- Inflation expectations
- Federal Reserve policy
- U.S. government borrowing
- Housing supply and demand
Even when the Fed cut interest rates in previous years, mortgage rates did not fall as much as expected. One major reason is that millions of homeowners locked in ultra-low mortgage rates during the pandemic and are unwilling to sell. This has kept housing supply tight and prices elevated.
According to research estimates, the U.S. housing market is short by around 4 million homes, a gap that continues to pressure affordability regardless of where mortgage rates move.
A Return to a Controversial Strategy
Trump’s proposal represents a return to a strategy used before the 2008 financial crisis, when Fannie Mae and Freddie Mac held large portfolios of mortgage-backed securities.
That approach ultimately contributed to massive losses when homeowners began defaulting on loans, forcing the federal government to step in and rescue the two firms. Since then, their role has been more limited, with tighter oversight from the Federal Housing Finance Agency (FHFA).
Bill Pulte, director of the FHFA, said the agency would take on the initiative, signaling regulatory support. Still, questions remain about how quickly such purchases could happen and whether congressional approval is required.
Political Context Behind the Move
Housing affordability has become a major political issue ahead of the midterm elections. Rising home prices, high mortgage rates, and limited supply have frustrated voters across income levels.
Trump has blamed the current housing crisis on the Biden administration, pointing to inflation, economic mismanagement, and what he calls a failure to prioritize housing policy.
Beyond mortgage bond purchases, Trump has also floated other housing-related ideas, including:
- Limiting large Wall Street firms from buying single-family homes
- Allowing homebuyers to tap retirement savings for down payments
Together, these proposals are designed to show voters that the administration is actively addressing housing costs.
What This Means for Homebuyers
If implemented, the plan could lead to modest declines in mortgage rates, possibly in the range of 0.1% to 0.25%, according to some analysts. While that may not sound dramatic, even small drops in mortgage rates can make a difference over time.
Lower mortgage rates could:
- Reduce monthly payments
- Increase refinancing activity
- Improve affordability at the margin
However, experts stress that mortgage rates alone cannot fix the housing crisis. Without a significant increase in housing supply, price pressures are likely to remain.
Analysis: Will This Actually Lower Mortgage Rates?
Trump’s proposal is bold, but its real-world impact may be limited.
What works in its favor:
- Large-scale bond purchases usually support lower mortgage rates
- Market reaction suggests investors see some credibility
- Refinancing activity could get a boost
What works against it:
- Mortgage rates are driven by broader economic forces
- Housing supply shortages remain unresolved
- Legal and political hurdles could slow implementation
In simple terms, this move could help nudge mortgage rates lower, but it is unlikely to bring back the ultra-low rates seen during the pandemic. For meaningful and lasting affordability improvements, lower mortgage rates must be paired with policies that increase housing supply.
Still, as a signal to markets and voters, the announcement shows a clear focus on mortgage rates and housing costs — issues that remain front and center for American households.
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