U.S. President Donald Trump said he was instructing his representatives to buy US$200 billion in mortgage bonds in a bid to drive rates and monthly payments down.
He announced the directive in a Truth Social post in what he calls one of his many steps to “restoring affordability”.
“This will drive Mortgage Rates DOWN, monthly payments DOWN, and make the cost of owning a home more affordable,” he said.
In the post, Trump said Fannie Mae and Freddie Mac, the two government-sponsored mortgage-issuing entities, were flush with cash due to his decision not to sell them in his first term.
In response to Trump’s post, the regulator who oversees Fannie and Freddie, Bill Pulte, said, "Thanks to President Trump, Fannie and Freddie will be executed”, in a post to X.
Hours before Trump’s post, Pulte also told CNBC he expected Trump to decide in the next month or two on a possible initial offering of Fannie and Freddie.
In his directive, Trump also slammed former President Joe Biden, claiming he had “ignored the housing market”.
“Everything was broken, but I, as President of the United States, have already fixed it!” Trump said.
“Now, I am giving special attention to the Housing Market.”
It is not clear whether it would be Fannie or Freddie, the Treasury Department or another entity doing the buying.
During times of extreme turmoil, like the housing crisis of 2008 and 2009, the Treasury made mortgage bond purchases.
It was also unclear whether this buying would have an impact on mortgage rates, as they typically follow the lead of long-term Treasury rates, rather than mortgage bond yields.
The 10-year Treasury yield ticked slightly lower after hours amid Trump’s comments.
The Trump administration has been trying to show it is responding to voter concerns surrounding affordability ahead of the mid-term elections in November.
Redfin chief economist Daryl Fairweather estimated the government purchases of mortgage debt could shave 0.25 to 0.5 percentage points off the rate for a 30-year fixed-rate mortgage.
However, he also argued it would not address other factors, including the chronic shortage of homes on the market, which has made home ownership unaffordable for many Americans.
“At a high level, I feel this is putting a Band-Aid on a deeper issue, and it probably wouldn’t lower rates enough to really undo the mortgage rate lock-in effect,” Fairweather told the Associated Press.
“Lowering mortgage rates by maybe a quarter point or half a point, maybe, will encourage more demand on the margins, but I don’t think it’s going to solve the restrictions that exist in the housing market.”
According to Bloomberg, Fannie and Freddie have already been adding to their portfolios of mortgages and bonds in an effort to push down mortgage rates.
