Mortgage Rates Drop Below 6% on Trump Bond Order
President Trump orders $200 billion in mortgage bond purchases through Fannie Mae and Freddie Mac, pushing 30-year rates to their lowest level since February 2023.
For the first time in nearly three years, the 30-year fixed mortgage rate sits below 6%.
The catalyst: President Trump announced Thursday he's directing $200 billion in mortgage bond purchases through Fannie Mae and Freddie Mac. The rationale is simple enough—the government-sponsored enterprises are "flush with cash," and buying mortgage-backed securities pushes yields down and rates with them.
By Friday, the 30-year average dropped 22 basis points to 5.99%, matching the low from February 2023. Homebuilders surged. Mortgage lenders ripped. And housing-adjacent trades printed green across the board.
The Homebuilder Rally
The market response was immediate and substantial:
| Stock | Friday Gain |
|---|---|
| Lennar (LEN) | +8.9% |
| D.R. Horton (DHI) | +7.8% |
| PulteGroup (PHM) | +7.3% |
| loanDepot | +24% |
| Opendoor (OPEN) | +19% |
| UWM Holdings (UWMC) | +11.6% |
| Rocket Companies (RKT) | +6.6% |
This is a sector that's been range-bound for months, stuck between elevated rates and persistent demand. The Trump directive broke the range to the upside—at least for a day.
How Much Does This Actually Help?
The skeptics aren't wrong to ask. JPMorgan's homebuilding analysts said Friday they "do not believe this initiative will have any significant impact on the housing market." Their math: $200 billion represents roughly 1.4% of the $14.5 trillion mortgage market. That's a marginal shift, not a structural change.
And homebuilders were already buying down rates. Builder incentives had pushed effective mortgage rates into the 5% range for new construction buyers before Trump's announcement. The directive provides psychological support and political cover, but the economics were already moving in this direction.
The bigger constraint isn't rates—it's supply. Goldman Sachs estimates America is short 4 million homes. Lower rates increase buying power but also intensify competition for limited inventory. That's inflationary for home prices, which partially offsets the affordability benefit of cheaper financing.
The Fed Angle
The timing creates an interesting dynamic with Fed policy. Friday's jobs report showed 50,000 December payrolls—cooler than expected—and cemented expectations that the central bank holds rates steady at the January 27-28 meeting. CME FedWatch puts the probability of no change at 97%.
TD Cowen projects the 10-year Treasury yield falls to 3.5% by year-end, down from 4.17% Friday. If that forecast proves accurate, 30-year mortgage rates could drift toward 5.25%—meaningful relief for a market that's spent two years above 6%.
The Trump directive accelerates a trend that may have happened anyway. Lower Treasury yields plus government mortgage bond purchases creates a one-two punch that pushes rates down faster than organic market forces would.
What Traders Should Watch
The homebuilder trade has legs if rates stay suppressed. D.R. Horton and Lennar have traded at compressed multiples for two years, priced for a "higher for longer" rate environment that may be shifting. A sustained move toward 5.5% mortgages would justify multiple expansion.
But there's execution risk. The $200 billion directive requires coordination between Treasury, Fannie, and Freddie. Implementation details matter. And Congress—particularly fiscal hawks—may object to what amounts to off-balance-sheet housing stimulus.
For mortgage lenders, the calculus is straightforward: lower rates drive refinancing activity and new purchase applications. That's revenue growth. Friday's moves in loanDepot and Rocket reflect expectations that volume picks up meaningfully.
The broader market absorbed the housing news as part of a record-setting week. Whether the mortgage rally sustains depends on rates holding these levels—and that's ultimately a Treasury yield question more than a Trump directive question.