On January 8th, President Trump announced that the government would purchase $200 billion worth of mortgage-backed securities, leading to a significant drop in mortgage rates on January 9th. The 30-year fixed-rate mortgage fell by 22 basis points to 5.99%.
According to Mortgage News Daily (MND), on January 9th, aside from the 30-year jumbo mortgage, other loan rates also experienced varying degrees of decrease. The 30-year fixed-rate mortgage dropped to 5.99%, a decrease of 22 basis points; the 15-year fixed-rate mortgage fell to 5.55%, a decrease of 19 basis points; the 30-year FHA mortgage rate declined to 5.65%, a drop of 21 basis points; and the 30-year VA mortgage rate decreased to 5.65%, with a 20 basis point drop.
MND’s mortgage rate expert, Matthew Graham, commented on January 9th that President Trump’s announcement of purchasing $200 billion in mortgage-backed securities carried significant weight. Graham mentioned that based on recent monthly disclosure data, government-sponsored enterprises Fannie Mae and Freddie Mac still had $202.9 billion in room on their balance sheets before reaching their current regulatory limits. This calculated move of $200 billion was not just a casual statement but a well-thought-out decision.
President Trump’s announcement to purchase $200 billion worth of mortgage-backed securities aiming to lower housing costs was made on January 8th at 4:25 p.m. on the Truth Social platform. Fannie Mae and Freddie Mac do not directly issue mortgages; they buy loans from lenders, package them into mortgage-backed securities or other products, and sell them to investors to bolster lender funding, thus providing lower and more stable mortgage rates to homebuyers.
Government acquisition of mortgage-backed securities indeed has the potential to lower mortgage rates. During the initial stages of the pandemic, the Federal Reserve bought $580 billion of agency mortgage-backed securities within the first two months, followed by additional purchases throughout the year. Simultaneously, the Fed lowered its benchmark interest rate to zero, resulting in an average 30-year fixed-rate mortgage hitting a record low of 2.75% in early 2021.
Regarding the impact of the $200 billion announced by Trump, Matthew Graham explained, “It depends on several factors, but the mortgage market’s reaction already indicates its influence.” He also added, “The real impact will depend on the specifics of how it is executed. Don’t expect overnight miracles. Be prepared for fluctuations and anticipate that interest rate tables at some lending institutions may not remain as consistent as you have been accustomed to over the years.”
MND, a specialized platform focusing on the U.S. mortgage market and interest rate information, tracks rate changes using daily indices and market commentary, serving as a crucial information source for assessing short-term rate trends.