Mortgage rates fell below 6% on Friday for the first time in years, after President Donald Trump ordered his “representatives” to begin purchasing $200 billion in mortgage bonds, his latest move to reduce costs for Americans struggling with the high cost of living.
The average interest rate on a 30-year fixed residential mortgage rose to 5.99% Friday morning, up from 6.21% Thursday, according to data provider Mortgage News Daily. This is the lowest 30-year average rate since February 2023.
As of Friday, average 30-year mortgage rates have fallen more than 1% over the past year.
Interest rates for a 15-year fixed-rate mortgage also fell significantly on Friday, falling to 5.55%.
Mortgage rates generally rise and fall very slowly, by a few tenths or even hundredths of a percent, per day. The latest developments are therefore out of the ordinary.
The sharp declines came after Trump wrote in Truth Social on Thursday that he was “directing my representatives to BUY $200 BILLION IN MORTGAGE BONDS.”
“This will lower mortgage rates, lower monthly payments and make the cost of owning a home more affordable,” Trump said in his message.
Federal Housing Finance Authority head Bill Pulte later said in his own social media post that “Fannie (Mae) and Freddie (Mac) are the entities that will make the purchases.”
Indeed, Trump’s announcement alone immediately pushed rates down. Pulte told reporters at the White House on Friday that he had already begun carrying out Trump’s instructions. “We have already invested $3 billion,” he said.
In recent months, Fannie Mae and Freddie Mac have purchased tens of billions of dollars’ worth of mortgage bonds. As of their last public filings, the two entities together held mortgage securities worth more than $230 billion.
If Fannie and Freddie bought an additional $200 billion in bonds, it would nearly double their holdings.
Rates fall because Fannie and Freddie buy the bonds from lenders, who then have more money to lend to homebuyers. With an increase in the supply of money to lend and relatively stable demand, interest rates and the price of mortgages tend to fall.
Trump’s announcement is his administration’s latest move to combat the affordability crisis hitting consumers at the start of an election year.
The administration also lowered some rates and fuel efficiency standards for passenger vehicles, measures aimed at reducing everyday costs for Americans.
UBS analysts wrote in a client note Friday that they believe Trump’s bond-buying plan could help lower 30-year fixed mortgage rates by more than a fifth of a percent.
“This decline could boost both demand for new construction and turnover for existing homes,” write UBS analysts.
But Trump’s bond-buying plan may not be a silver bullet.
The average interest rate for current U.S. residential mortgages is stable at 4.4%, well below the average rate for a new mortgage.
That means the impact of Trump’s plan on homeowners who are hesitant to sell their homes because of low mortgage rates may be limited.
“Similar to our view of President Trump’s message regarding banning institutional investors from purchasing homes, we do not believe this move will have a significant impact on the housing market,” JPMorgan Chase homebuilding analysts said Friday.
“The $200 billion in mortgages represents only about 1.4 percent of the approximately $14.5 trillion mortgage market,” they write.
