The average 30-year fixed-rate mortgage currently sits at 6.06%, its lowest level since September 2022 and falling from 6.16% last week. Mortgage rates trended lower after President Trump called on Fannie Mae (FNMA) and Freddie Mac (FMCC) to purchase $200 billion in mortgage bonds.
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Higher demand for these bonds drives their prices higher, and as bond prices rise, their yields fall. Mortgage rates are closely tied to the yields on these bonds, so when yields drop, mortgage rates tend to decline as well.
Housing Demand Picks Up amid Falling Rates
The lower rates have helped ease an affordability crisis across the country. In December, existing home sales grew by 5.1% to an annualized rate of 4.35 million, marking the highest pace since February 2023.
However, analysts have questioned whether $200 billion is enough to drive rates materially lower. “Our view is that $200 billion of purchases is a drop in the ocean of the mortgage-backed securities market,” said Capital Economics North America economist Thomas Ryan. “It’s not enough.” Capital Economics expects rates to rise to 6.5% by the end of the year.
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Mortgages Rates Sink to 3-Year Low after Trump Calls for $200 Billion Purchase of Mortgage Bonds
