Mortgage update 1/8/2025

In December, President Trump pledged to roll out “the most aggressive housing reform plans in American history,” and he is working hard to keep his word.

Yesterday, Trump announced that he plans to ban large institutional investors from purchasing single-family homes, giving other homebuyers a better advantage. Many have pointed out that large institutional investors account for only 3% of the market, so that it wouldn’t be a game-changer.

Today, Trump announced another significant move, directing Fannie and Freddie Mac to purchase $200 billion in mortgage bonds. By buying $200 billion in mortgage bonds, the government artificially increases demand for home loans. This drives the price of those loans up and their yields (interest rates) down. Fannie and Freddie can add only another $ 100 billion each to their portfolio.

This is not the first time in history that a government has taken such a move. The government purchased $100 billion last year, and between 2020 and 2022, the Fed spent over a trillion dollars to stabilize the economy, as well as in 2008-2010, which was called Quantitative Easing.

While this will lower mortgage rates, it risks inflating the already overinflated housing market.

Next up is tomorrow’s Job report.

Today’s national average 30-year mortgage rate is 6.21%