Mortgage rates fell sharply on Friday, a day after President Donald Trump said on social media that he is instructing mortgage giants Fannie Mae and Freddie Mac to buy $200 billion in mortgage bonds.
“This will drive Mortgage Rates DOWN, monthly payments DOWN, and make the cost of owning a home more affordable,” he said in the Truth Social post.
The rate on a 30-year mortgage dropped 22 basis points to 5.99%, matching the low from Feb. 2, 2023, according to Mortgage News Daily.
Fannie Mae and Freddie, which are in government conservatorship, do not originate home loans. They buy loans from lenders, bundle them into mortgage-backed securities, or MBS, and sell them to investors — thereby replenishing lender funds for new loans and keeping interest rates lower and more stable for homebuyers.
Purchasing more mortgage-backed bonds or securities does move mortgage rates lower. In the first two months of the Covid pandemic, as markets reeled, the Federal Reserve purchased $580 billion in agency MBS. It then continued buying more throughout the year. From March 2020 through June 2021, the Federal Reserve increased its agency MBS holdings from $1.4 trillion to $2.3 trillion, according to the Dallas Fed.
