President Trump has directed a $200 billion mortgage bond purchase through Fannie Mae and Freddie Mac to lower mortgage rates and tackle the US housing affordability crisis, reviving a strategy last used during the 2008 financial meltdown.
President Donald Trump has revived a controversial tool from the post‑2008 crisis era to address the United States’ deepening housing affordability problems, directing a $20 billion mortgage bond purchase through government‑controlled mortgage giants Fannie Mae and Freddie Mac.
The move, announced on social media and championed by Trump as proof the administration is confronting widespread concerns about homeownership costs, marks a striking return to direct government intervention in the housing finance system.
The policy directive, which does not require fresh congressional approval, seeks to lower mortgage rates and monthly payments by boosting demand for mortgage‑backed securities (MBS). That, in theory, should push down the yields lenders charge on home loans, a step designed to make homeownership more accessible for millions of Americans facing stubbornly high borrowing costs.
But analysts caution that this strategy once deployed by the Federal Reserve during the 2008 financial crisis and the pandemic may offer only marginal relief in a housing market strained by structural shortages and historically low inventory.
A flashback to crisis economics
The backbone of Trump’s latest policy is Fannie Mae and Freddie Mac, the government‑sponsored enterprises (GSEs) at the centre of the housing finance system that were placed under federal conservatorship in the wake of the 2008 meltdown. For years, the two entities played a central role in stabilising mortgage markets by buying and securitising home loans, helping keep credit flowing when private lenders pulled back.
Trump’s directive instructs his “representatives” to deploy $200 billion in mortgage bonds from the GSEs’ balance sheets to drive down mortgage rates in his words, to bring “mortgage rates down, monthly payments down, and make the cost of owning a home more affordable.”
The move echoes past large‑scale asset purchases by the Federal Reserve, which during the pandemic bought hundreds of billions of mortgage‑backed securities as part of quantitative easing to lower long‑term borrowing costs. But unlike those Fed interventions backed by monetary policy tools — this effort would be funded directly through Fannie Mae and Freddie Mac’s cash holdings and securities, not through new central bank money creation.
White House officials have not spelled out a timetable or exact operational details for the purchases, leaving markets and analysts guessing about execution and potential market impact.
Will it move the housing needle?
Experts predict the effect on mortgage interest rates will be relatively limited. Economists cited by Reuters suggest the plan could reduce borrowing costs by roughly 10 to 15 basis points, a small change compared with overall rate levels. Mortgage rates have averaged in the low‑6 percent range far above the sub‑3 percent rates seen when the Federal Reserve last engaged in extensive bond buying.
Moreover, many homeowners remain locked into low‑rate mortgages secured during the pandemic, and are reluctant to sell, reducing available inventory for prospective buyers. That supply shortage driven by a chronic lack of new construction is widely seen as a more entrenched factor in high home prices and limited affordability than interest‑rate levels alone.
Daryl Fairweather, chief economist at Redfin has said such an intervention may offer only a “Band‑Aid” on deeper structural issues. Even if mortgage rates fall modestly, it may do little to reverse what some analysts call the “mortgage rate lock‑in” effect or to significantly expand housing supply.
Critics also warn that tapping the GSEs’ cash reserves for massive bond purchases could weaken their capacity to support the broader mortgage market during future downturns, potentially exposing the housing finance system to greater risk if economic conditions worsen.
Political timing and broader policy
Trump’s bond‑buying announcement comes amid broader housing policy moves, including proposals to curb institutional investors from acquiring single‑family homes, a target long championed by critics who blame large corporate landlords for tightening inventory and driving up prices.
The mortgage bond strategy also has clear political dimensions, as the president seeks to position himself as confronting affordability ahead of critical midterm elections, when cost‑of‑living issues are top of voters’ minds.
Yet even supporters concede that without substantial increases in housing supply and long‑term reforms to the housing market, the bond purchase alone is unlikely to resolve America’s affordability crisis. It may provide modest breathing room on mortgage costs but the deeper challenge remains a shortage of homes relative to demand, a problem rooted in decades of under‑construction and regulatory constraints.
In reviving a tool from the depths of crisis economics, the Trump administration is betting that history can offer a template for relief even as the historic paths it follows may not fully confront the affordability problem at the heart of the nation’s housing market.
With inputs from agencies
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