Trump says he wants government to buy $200 billion in mortgage bonds in a push to bring down mortgage rates

President Donald Trump said on social media Thursday that he is directing the federal government to buy $200 billion in mortgage bonds, a move he said would help reduce mortgage rates at a time when Americans are worried about home prices.

Trump and the White House have been trying to show they are responding to voter concerns about affordability ahead of the midterm elections in November. Home prices have generally risen faster than incomes because of a persistent construction shortfall, making it harder for renters to buy their first home and for existing owners to upgrade to a new property — a challenge that dates back to Trump's first term and the recovery from the housing market collapse that triggered the global financial crisis in 2008.

Trump said the two mortgage companies under government conservatorship, Fannie Mae and Freddie Mac, have $200 billion in cash that will be used to make the purchase.

“This will drive Mortgage Rates DOWN, monthly payments DOWN, and make the cost of owning a home more affordable,” Trump posted on social media.

White House officials did not immediately respond to questions about the timelines for how purchases would occur.

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The Federal Reserve has in the past, bought mortgage bonds during times of economic turmoil in order to help reduce interest rates, leading many homeowners to refinance into rates of 3% or less. The low rates of the recent past make these homeowners reluctant to sell their properties, depriving the market of inventory.

“At a high level, I feel this is putting a Band-Aid on a deeper issue and it probably wouldn’t lower rates enough to really undo the mortgage rate lock-in effect,” said Daryl Fairweather, chief economist at the real estate brokerage Redfin.

Fairweather estimated the government purchases of mortgage debt could shave 0.25 to 0.5 percentage points off the rate for a 30-year fixed rate mortgage. But the purchases wouldn’t address other factors such as a chronic shortage of homes on the market, which has helped make homeownership unaffordable for many Americans, she cautioned.

Mortgage rates have been averaging around 6.2%, according to Freddie Mac, which went into conservatorship along with Fannie Mae in 2008 when the US economy crashed during the Great Recession. Thirty-year mortgage rates haven't been below 6% since September 2022.

“Lowering mortgage rates by maybe a quarter point or half a point maybe, will encourage more demand on the margins, but I don’t think it’s going to solve the restrictions that exist in the housing market,” Fairweather said.

There is also a risk because Trump would be spending the cash reserves that are supposed to help be a buffer against an economic downturn akin to what happened during the Great Recession. In a sense, Freddie Mac and Fannie Mae could be more vulnerable if anything negative happens to the housing market, meaning Trump is betting that possibility is highly unlikely.

Separately, the Fed holds roughly $2 trillion worth of mortgage-backed securities on its balance sheet. That's down from $2.7 trillion in June 2022. The Fed began to unwind its mortgage-debt holdings as the US economy recovered from the global pandemic.

Mortgage rates began to climb as inflation spiked coming out of the global pandemic, with the consumer price index hitting a four-decade high in 2022. The average mortgage rate is down from nearly 7% at the start of Trump's second term last year, yet the decrease has done little to reassure a public that feels pressure from the costs of housing, food and energy.

When interest rates fall, it can become cheaper to service housing debt every month. The reduced monthly payments can improve affordability for a period until home prices adjust in response to changes in the rates. There was roughly $21.1 trillion in outstanding mortgage debt as of the middle of last year, according to the St. Louis Federal Reserve.

Many homeowners took advantage of low interest rates during the pandemic to refinance their mortgages at rates of 3% or lower.

Trump last month said he planned to unveil housing reforms -- and on Wednesday, he said he wants to block institutional investors from buying houses.