Trump’s mortgage bond plan shows limited impact as market risks cloud housing outlook

Early evidence suggests that U.S. President Donald Trump’s effort to make housing more affordable by directing government-backed agencies to buy mortgage-backed bonds has delivered only marginal relief, while broader market and geopolitical risks could push borrowing costs higher over time, according to a Reuters analysis.

The administration’s plan, which targets up to $200 billion in purchases of mortgage-backed securities, appears unlikely to significantly reduce mortgage rates or improve affordability. Economists cited by Reuters broadly agree that the U.S. housing market’s core challenge is insufficient supply rather than a lack of demand or financing, limiting the effectiveness of bond-buying measures.

Some analysts see the program as having only a modest influence on borrowing costs. While mortgage bond yields have narrowed slightly relative to U.S. Treasury yields, the effect has been limited. Reuters notes that benchmark 30-year mortgage rates had already been declining before the announcement, largely due to the Federal Reserve’s rate cuts aimed at supporting a softening labour market while keeping inflation in check.


Data from Freddie Mac show that average 30-year fixed mortgage rates fell to 6.15% by the end of 2025, down sharply from just under 8% in late 2023. After Trump directed Fannie Mae and Freddie Mac to begin buying back some of their bonds, rates briefly dipped to their lowest level since 2022 before edging higher again.

More recent figures from the Mortgage Bankers Association indicate that mortgage rates declined further last week to their lowest level since September 2024. The drop helped lift refinancing activity to its highest level in several months, Reuters reports, though the association cautioned that affordability pressures remain significant.

Effort to offset the Fed Balance Sheet reduction

The Trump administration has confirmed that mortgage bond purchases are underway but has disclosed few operational details. Reuters reports that the Federal Housing Finance Agency declined to provide information on the pace or total volume of buying so far.

Treasury Secretary Scott Bessent has said the initiative is partly intended to counteract the Federal Reserve’s ongoing reduction of its mortgage-backed securities holdings, which have been shrinking as bonds mature and are not reinvested. The Fed’s runoff has reduced its mortgage bond portfolio from roughly $2.7 trillion in mid-2022 to about $2 trillion.

However, economists and central banking experts cited by Reuters question the rationale for offsetting that runoff. Many argue that the primary market impact of balance-sheet policies typically comes at the announcement stage rather than during gradual reductions. Most analysts see little evidence that the Fed’s relatively modest pace of mortgage bond runoff has pushed mortgage rates higher.

Several Federal Reserve officials have indirectly expressed scepticism that bond purchases alone can resolve housing affordability issues. Reuters notes that policymakers have repeatedly pointed to structural supply constraints in major housing markets as the dominant factor keeping prices elevated.

At the same time, falling mortgage rates face new headwinds from rising yields on longer-dated government bonds. The 10-year U.S. Treasury yield, which strongly influences mortgage pricing, has climbed to its highest level in months amid a global bond selloff triggered in part by turbulence in Japanese markets.

Reuters adds that geopolitical tensions linked to Trump’s trade threats and confrontations with allies have also weighed on demand for U.S. assets, including Treasuries. That shift has the potential to push borrowing costs higher, undermining any limited gains from mortgage bond purchases.

Taken together, Reuters concludes, the administration’s strategy may offer short-term relief at the margins, but without a meaningful expansion in housing supply, it is unlikely to materially improve affordability for most Americans.

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