President Donald Trump unveiled a new plan aimed at improving housing affordability in the United States by calling for mortgage giants Fannie Mae and Freddie Mac to purchase $200 billion in mortgage bonds. The move is designed to help push 30-year mortgage rates below 6%, a level that has eluded homebuyers amid persistently high borrowing costs.
“I am instructing my Representatives to BUY $200 BILLION DOLLARS IN MORTGAGE BONDS. This will drive Mortgage Rates DOWN, monthly payments DOWN, and make the cost of owning a home more affordable,” Trump wrote on Truth Social on Thursday.
The directive seeks to influence mortgage spreads, which are the difference between yields on 10-year Treasury bonds and 30-year mortgage rates. Traditionally, mortgage rates run roughly 1.8 percentage points above Treasury yields. In recent years, however, spreads have widened, keeping borrowing costs elevated even as Treasury yields fell. By buying additional mortgage-backed securities (MBS), Trump hopes to narrow the spread and lower the overall cost of borrowing.
Analysts say the plan could help ease mortgage rates, but its potential impact is limited by structural challenges in the housing market. “I think it’s an important first step, but it’s not going to be a cure-all,” said Leslie Falconio, head of taxable fixed income strategy at UBS Global Wealth Management. “Focusing on the demand side of the housing market is great, but you really need to focus on supply to lift affordability.”
The U.S. is currently facing a severe housing supply shortage, estimated between 1.5 million and 5.5 million homes. JPMorgan put the gap at 2.8 million homes in October, a deficit that could take a decade to resolve without significant new construction. The limited availability of homes means that lowering mortgage rates alone may not make housing substantially more affordable for many Americans.
Fannie Mae and Freddie Mac currently hold relatively small portfolios of mortgage-backed securities, totaling around $247 billion as of November. By comparison, banks, foreign investors, and the Federal Reserve are far larger players in the $9 trillion U.S. mortgage market. Even so, the two government-sponsored enterprises have actively been increasing their holdings. Since the end of 2024, they have added more than $50 billion in MBS, contributing to a modest drop in mortgage spreads and rates.
The effects of these purchases are already visible. Over the past year, average mortgage rates have fallen from highs in the mid-6% range to just under 6.2%. Mortgage spreads have mirrored this trend, dropping from a peak of 2.65 percentage points in April to just below 2 points in recent weeks. “That’s actually moving the needle in terms of for-sale housing affordability right now,” said Rick Palacios Jr., director of research at housing consultancy John Burns Research and Consulting.
Markets reacted quickly to Trump’s announcement. Mortgage News Daily reported that the average 30-year fixed mortgage rate fell 22 basis points to 5.99% on Friday, down from 6.21% a day earlier.
Experts note that the move appears to be modeled, in part, on Federal Reserve actions following the 2008 financial crisis, when large-scale MBS purchases helped compress spreads and supported the housing market. Walt Schmidt, senior vice president of mortgage rate strategies at FHN Financial, suggested that if mortgage spreads tighten by 50 to 70 basis points, primary mortgage rates could dip into the mid-5% range. That, he said, could stimulate refinancing activity and new home purchases.
However, there are potential pitfalls. Lower mortgage rates could further intensify demand for homes at a time when supply remains constrained, potentially driving up home prices. “Let’s assume that [MBS buying] materially drives down mortgage rates. That, in turn, will make it possible for borrowers to obtain bigger mortgages and bid up the prices of houses that much more,” said Christopher Maloney, a mortgage strategist at BOK Financial.
Joel Berner, senior economist at Realtor.com, emphasized that while the $200 billion purchase could help, it may not replicate the impact of prior Fed programs. “When similar actions by the Federal Reserve have lowered rates in the past, it’s because markets viewed those purchases as large, sustained, and predictable,” he said. “Without that same level of scale and credibility, any impact on mortgage rates would likely be modest and short-lived.”
Critics also point out that focusing solely on boosting demand addresses only part of the affordability problem. The U.S. housing market continues to struggle with construction bottlenecks, regulatory hurdles, and rising material costs, factors that monetary policy alone cannot resolve. Without expanding supply, lower rates could paradoxically push home prices higher, offsetting any gains from reduced borrowing costs.
Despite these concerns, Trump’s plan signals a renewed effort to use the mortgage market as a lever for affordability. If executed, it would formalize and significantly expand on steps Fannie Mae and Freddie Mac have already taken, potentially reshaping mortgage spreads in the near term. Yet, housing experts caution that sustainable improvements in affordability will require a longer-term strategy addressing both demand and supply challenges.
For now, the immediate effect of the plan seems to be a small but tangible relief for borrowers, with mortgage rates dipping just below 6%. Whether that momentum can be maintained—or translated into meaningful homeownership gains—remains uncertain in a market where limited supply continues to dominate the equation.
