President Trump directed Fannie Mae and Freddie Mac to purchase $200 billion in mortgage bonds, hoping to drop interest rates for all the potential buyers currently locked out of the market.
Trump posted on Truth Social that he is ordering his team to buy that $200 billion in bonds because it will force mortgage rates and monthly bills down, making homeownership more affordable. William Pulte, the head of the Federal Housing Finance Agency, backed this up on social media and confirmed that Fannie and Freddie will indeed go through with buying the bonds.
The markets reacted right away, and by Friday, the 30-year mortgage rate fell to around 6%, which is the lowest it has been since early 2023, according to Mortgage News Daily. Mortgage News Daily reported that while rates have crashed to three-year lows, there are still some strings attached.
After you take out a home loan, your bank usually turns around and sells it to Fannie Mae or Freddie Mac. Those agencies then bundle the loans into investments known as mortgage-backed securities and sell them off to investors. This system ensures lenders always have cash on hand and, theoretically, stops rates from getting out of control. The new strategy involves having Fannie and Freddie buy these bonds to help push mortgage rates lower.
$200 billion — a drop in the bucket
The big question is if $200 billion is enough to make a real difference. The issue, according to LPL Financial, is that the total market for these securities is massive…about $11 trillion. Spending $200 billion is a lot of money, but it likely isn’t enough to shake up the entire market on its own.
Fannie and Freddie were actually already moving down this path. Since June, they boosted their bond holdings by over 25%, hitting nearly $234 billion by October. These existing purchases, along with the extra buying Trump ordered, are designed to knock down mortgage rates that have been stuck above 6% for years. Although borrowing costs have dipped a bit recently, they are still twice as high as they were earlier this decade.
Mike Simonsen, the chief economist at Compass, posted on X that Fannie and Freddie have already packed their balance sheets with these mortgage securities. He observed that Trump is pushing for more of the same, adding that while it looks like it will help rates, he questions how long the strategy can actually last.
Other experts are even more doubtful. Joel Berner, a senior economist at Realtor.com, described the likely impact as small and temporary, pointing out that the Federal Reserve previously bought $2 trillion worth of these bonds, which is ten times the size of Trump’s order. Berner cautioned that even if rates do drop, the help might not last long because a surge of new buyers could drive home prices up, wiping out any savings from Trump’s plan.
Could this be counterproductive to lower rates?
There is one more complication to consider. The administration has also suggested a separate plan to take Fannie and Freddie out of government control. Even though their stock trades publicly on the over-the-counter market, the U.S. Treasury has owned the majority share of both companies since the 2008 financial crisis.
Some analysts caution that taking the companies private again could actually drive mortgage rates up, which would defeat the purpose of the order issued this week. The reason is that having the government behind them helps keep borrowing costs down.
This order marks Trump’s second major housing move of the week. On Wednesday, he announced a plan to stop big investment firms from buying single-family houses, another effort to fix affordability in a market where high prices and a lack of options have locked out so many people.
FAQs
What is President Trump trying to do?
In a nutshell, he’s trying to make home loans cheaper. He ordered two big companies that work with the government, Fannie Mae and Freddie Mac, to spend $200 billion buying mortgage bonds. That would force interest rates down so monthly mortgage payments are more affordable.
Will this make it easier for me to buy a house?
It might not lower the house prices, but it would help with the loan. Interest rates have already dropped down to 6%, but it could make the general public rush to buy a house, so we will see how it plays out.
Is $200 billion enough to fix the problem?
The whole market is worth $11 trillion, so $200 billion is only 1.82%. Most experts don’t think it will have a longlasting effect, but it may lower rates temporarely.