Trump’s $200 Billion Plan Lower Mortgage Rates, Explained

President Donald Trump this week has zeroed in on an issue that’s at the heart of America’s affordability crisis: housing costs.

But it’s not clear if his latest proposal, which involves instructing his “representatives” to purchase $200 billion in mortgage-backed securities, will move the needle for the housing market in the long run, economists and analysts told Business Insider.

The mortgage-bond purchasing plan, which Trump announced on Truth Social Thursday night, is a lot to grapple with for people unfamiliar with the mortgage market. But the logic behind how this could make buying a home easier goes something like this:

• Fannie Mae and Freddie Mac, two government-sponsored mortgage buyers, already hold billions in debt backed by US mortgages.
• If the two entities were to increase their holdings of mortgage-backed securities, that could help drive down yields on the bonds.
• The yield on mortgage-backed securities has some influence over mortgage rates. Lower yields could result in lower costs for mortgage borrowers, making housing payments more affordable.

The plan could have a quantitative easing-like impact on the market, Oliver Allen, a senior US economist at Pantheon Macroeconomics, told Business Insider. QE refers to the Fed’s bond-buying program aimed at adding liquidity to the debt market and stimulating economic activity by encouraging more borrowing. However, the Fed has generally undertaken QE in times of economic turmoil, while Trump is piling into mortgage bonds while the economy is doing pretty well.

The president’s plan has already moved mortgage rates. The average 30-year fixed mortgage rate dropped from 6.21% to 5.99% on Friday morning, according to Mortgage News Daily. That’s the lowest level in about three years, and experts are optimistic that rates could fall further.

Zelman & Associates, a boutique housing research firm, estimated that mortgage rates could fall slightly below 6% under the new MBS purchasing plan, down from its most recent mortgage rate forecast of 6.2% for 2026.

Joel Berner, a senior economist at Realtor.com, estimated that the purchasing plan could drive mortgage rates as much as 50 basis points.

But the move might be a one-time drop, and the plan may not alter the picture for housing affordability in the long run, Berner and Allen said.

Here’s why.

It’s not clear how this will work

It’s unclear what Trump meant when he said he told his “representatives” to purchase $200 billion in mortgage-backed securities. The timing and mechanism behind the bond purchases also remain unclear, Zelman & Associates wrote in a note on Friday.

It’s also murky how much of a difference $200 billion will make in the $9 trillion MBS market, analysts at Deutsche Bank wrote in a note on Friday. The Fed, for reference, has around $2 trillion worth of mortgage-backed securities on its balance sheet, Realtor.com’s Berner said.

The MBS market is the largest and most liquid in the world after US Treasurys, and buyers are plentiful. Purchasing around 2% of the total outstanding value of bonds in the market might amount to a drop in the bucket a far as impact.

“Without that same level of scale and credibility, any impact on mortgage rates would likely be modest and short-lived,” Berner wrote.

“I don’t think this policy on its own can really do very much,” Allen said.

The housing market needs more houses

While borrowing costs have been a barrier to homebuyers in recent years, the real issue is supply. A lack of available homes has been the key constraint to truly making housing affordable for more Americans, Berner said. By some estimates, the US is short 5 million homes, or 3.7% of the current supply.

Should rates come down without an increase in housing inventory, that could actually worsen affordability by intensifying competition in the housing market and causing home prices to rise.

“The long-term real impact is on the supply side. So this demand boost might help in the short run, might boost sales activity, potentially might boost prices or stabilize prices at least, but we don’t really see this as a long-run solution,” Berner told Business Insider.

“I think even if you can nudge down mortgage rates at the margin, you’re still going to have very high home prices and very stretched affordability as a result,” Allen said.

Affordability is top of mind for Trump

Taken along with Trump’s ban on large investors buying single-family homes, the MBS plan shows that the administration is keenly aware that affordability is an issue for many Americans—and a potential political liability as the midterms approach.

Housing has been a crucial focus for Trump all throughout his second term, but the president’s zeal for making housing cheaper appears to have picked up as campaign season approaches, Allen noted.

“They’re throwing a lot of darts at the board right now,” Berner said, referring to the president’s other initiatives, like introducing a 50-year mortgage and banning big investors from purchasing homes. “I think they’re just trying to pull out all the stops.”