Mortgage rates drop below 6% for the first time in 3 years as Trump official says purchases of mortgage bonds are starting

By Aarthi Swaminathan

The 30-year mortgage rate dropped 22 basis points in one day

President Donald Trump's proposal to buy up $200 billion in mortgage-backed securities quickly impacted the mortgage market, driving down rates.

President Donald Trump's proposal that "representatives" buy up $200 billion in mortgage bonds pushed mortgage rates down to the lowest level in nearly two years on Friday.

The 30-year fixed-rate mortgage, which most home buyers use to finance their purchase, fell 22 basis points to 5.99%, according to a daily survey by Mortgage News Daily. That's the first time since February 2023 that the 30-year mortgage rate has gone below 6%.

Trump said in a social-media post Thursday that he was instructing "representatives" to buy $200 billion in mortgage-backed securities in an effort to drive mortgage rates down and lower the cost of purchasing a home for Americans.

The announcement had its intended effect on mortgage rates, specifically on loans backed by Fannie Mae and Freddie Mac, pushing the rates down through Friday, experts told MarketWatch. Federal Housing Finance Agency head Bill Pulte said Thursday on social media that Fannie and Freddie would purchase the bonds.

Pulte later on Friday told reporters that the administration has "put in a $3 billion buy already."

Falling mortgage rates could reignite a depressed housing market

A significant drop in mortgage rates would be welcome news for both aspiring home buyers and homeowners looking to refinance.

"2026 could be the first spring season for housing since 2022 where resale buyers too can buy with a 30-year mortgage starting with a 5," Rick Palacios Jr., director of research at John Burns Research and Consulting, wrote in a post on X.

"Only homebuilders could offer that in recent years via rate buydowns, so market share shift back to existing homes will be a 2026 housing theme," he added.

'2026 could be the first spring season for housing since 2022 where resale buyers too can buy with a 30-year mortgage starting with a 5.'Rick Palacios Jr., John Burns Research and Consulting

Typically, mortgage rates rise and fall in tandem with the yield on the 10-year Treasury note BX:TMUBMUSD10Y. But "the 10-year Treasury yield is about where it was yesterday, so this is a story of spreads," Joel Berner, a senior economist at Realtor.com, told MarketWatch on Friday.

(Realtor.com is operated by News Corp subsidiary Move Inc.; MarketWatch publisher Dow Jones is also a subsidiary of News Corp.)

A mortgage spread is the difference between the rate on a 30-year mortgage and the yield on a 10-year Treasury note. Mortgage loans are riskier than government bonds, so lenders and investors use the spread to account for factors such as credit risk and loan-servicing costs.

Following Trump's announcement, that spread fell from 1.15% Thursday to 0.95% on Friday in the space of 18 to 20 hours, Skyler Weinand at Regan Capital told MarketWatch. Weinand is also the portfolio manager of the Regan Floating Rate MBS exchange-traded fund MBSF, which invests in government-backed mortgage securities.

How are government bonds linked to mortgage rates? If the government were to purchase more mortgage bonds, the prices of those bonds would increase, and as a result, the yields that the bonds pay would decrease. That brings the spread down.

Falling rates would also be welcomed by industry players such as home builders. Shares of major builders such as D.R. Horton (DHI), Lennar (LEN), PulteGroup (PHM) and Toll Brothers (TOL) were up over 6% midday Friday.

Shares of mortgage giants Rocket (RKT) and United Wholesale Mortgage (UWMC) were up 8% and over 12%, respectively.

Buying up mortgage bonds is 'one of the easiest levers to pull' to pressure mortgage rates down

Anthony Deal, a senior mortgage consultant in Charlotte, N.C., told MarketWatch that he was getting "quite a bit of calls" on Friday from clients.

Michael Read, principal at Bridgeway Mortgage & Real Estate Services in Morristown, N.J., told MarketWatch that he hopes the optimism on lower rates brings the 30-year rate down to the mid-5% range.

With a 30-year mortgage at rate of 5.99%, a buyer purchasing a median-priced $400,000 home with a 10% down payment would pay about $2,500 a month.

The initial drop in rates happened in response to the president's Truth Social post and not because of any action by Freddie or Fannie to make the purchases, Weinand noted. "The anticipation of that happening alone has moved the market," he said.

At the same time, when it comes to actually lowering housing costs, "this is one of the easiest levers to pull," Weinand added, in contrast to other proposals Trump has floated, like banning institutional investors from buying single-family homes, a step that could require congressional approval.

"This is something that could happen within a matter of days," he said.

Read more: Why Trump banning institutional investors like Blackstone from buying homes won't bring down housing costs, according to experts

-Aarthi Swaminathan

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01-09-26 1616ET