US bond buying trims US mortgage costs, but structural housing shortage still squeezes affordability
US mortgage rates have snapped back below 6 percent after US President Donald Trump pledged a US$200bn mortgage‑bond buying plan — a US policy shift that matters far more for rates and risk sentiment than for fixing America’s underlying housing shortage.
Trump said on Truth Social that he is instructing his representatives to “BUY $200 BILLION DOLLARS IN MORTGAGE BONDS” to push US mortgage rates and monthly payments down and make home ownership more affordable in the United States, according to CNBC.
The average US 30‑year fixed mortgage rate dropped 22 basis points to 5.99 percent on Friday, matching its early‑2023 low, as per Mortgage News Daily cited by CNBC.
That move came immediately after Trump’s announcement, signalling how quickly US mortgage‑backed securities (MBS) markets can respond to perceived policy support.
The Financial Times reported that US housing finance director Bill Pulte said a “mixture” of Fannie Mae and Freddie Mac would execute the purchases and that the move would not require congressional approval.
The same report noted that the US MBS market is about US$11tn in size, with around US$300bn trading daily, underscoring that US$200bn is meaningful but not dominant.
According to UBS, cited by CNBC, US$200bn of agency MBS buying could cut US mortgage rates by roughly 10–25 basis points, taking the US 30‑year rate to around 6.0 percent from 6.21 percent.
Harley Bassman at Simplify Asset Management told the Financial Times that the planned buying is “not that significant” at market scale and would be “a little helpful” rather than enough to slash rates by 50 basis points.
Fannie Mae and Freddie Mac do not originate mortgages; they buy loans from lenders, pool them into MBS and sell them to investors, helping keep US mortgage rates lower and more stable, as explained by CNBC.
Both entities remain under US government conservatorship following their 2008 rescue.
Pulte told the Financial Times the administration wants to “use the full force of Fannie” to reverse what it blames on the previous administration’s impact on affordability.
The playbook mirrors what the US Federal Reserve did during Covid.
CNBC reported that from March 2020 to June 2021, the Fed lifted its agency MBS holdings from US$1.4tn to US$2.3tn. Over the same period, it cut its policy rate to zero.
This helped drive the US 30‑year mortgage rate to a record low of 2.75 percent at the start of 2021.
The Financial Times said the Fed still holds about US$2tn in mortgage bonds.
This renewed use of the US government‑sponsored enterprises as policy instruments complicates expectations for their eventual exit from conservatorship.
Reuters reported that TD Cowen analyst Jaret Seiberg noted Trump’s praise for not taking Fannie Mae and Freddie Mac public in his first term “does not sound like a President who is in a rush to IPO the enterprises.”
JonesTrading analyst Mike O’Rourke told Reuters that if the GSEs can serve as a funding arm for presidential policy, investors should not expect them to be re‑privatised.
Trump has paired the bond‑buying pledge with a proposal to ban large institutional investors from buying more US single‑family homes, aiming to help first‑time buyers, according to the Wall Street Journal.
That demand‑side tilt is politically attractive but does not change America’s structural supply gap.
CNN reported that Goldman Sachs Research estimates the United States needs about 4m additional homes to restore affordability.
Jake Krimmel, senior economist at Realtor.com, told CNN that banning big institutional buyers “is not going to move the needle as far as affordability goes,” calling them a “red herring” in a problem driven by long‑running undersupply.
Institutional owners with more than 1,000 properties accounted for only 1 percent–3 percent of US home purchases in 2025, with most investor activity coming from smaller “mom‑and‑pop” landlords.
Economists quoted by CNN argued that more effective US federal intervention would incentivise state and local governments to add supply — for example, by streamlining permitting and easing zoning to allow denser construction.
Columbia University professor Stijn Van Nieuwerburgh told the Wall Street Journal that “whenever we subsidize mortgages, guess what? It all gets capitalized into home prices,” warning that demand‑side subsidies “don’t really work” when US housing supply does not expand.
CNBC calculated that if US mortgage rates fall to 5.9 percent, a borrower buying the median‑priced US home at about US$425,000 with 20 percent down and a 30‑year fixed mortgage would save around US$118 a month.
That is meaningful for marginal US first‑time buyers but modest in the context of US home prices that the Wall Street Journal say are roughly 50 percent above pre‑pandemic or 2019 levels.
US refinance applications were already 133 percent higher year over year before Trump’s pledge, as the US 30‑year rate retreated from a 7.16 percent peak a year earlier.
The usual US rule of thumb is that a refinance is worthwhile when borrowers can cut their rate by more than 75 basis points, but CNBC noted that the majority of US homeowners still hold mortgages below 4 percent, limiting how many can benefit from marginal declines.
On the new‑build side, CNBC said US homebuilder stocks rallied on the announcement.
UBS analyst John Lovallo told CNBC that any demand bump may be “marginal,” with the larger effect being room for US builders to pull back on costly incentives and protect margins, after they had already been buying down rates into the 5 percent range.
