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Donald Trump has said he would launch a $200bn mortgage bond-buying programme in an attempt to lower mortgage rates, as the US president seeks to tackle an affordability crisis that has weighed on his popularity.
Trump posted on Truth Social that he was “instructing my Representatives to BUY $200 BILLION DOLLARS IN MORTGAGE BONDS”.
“This will drive Mortgage Rates DOWN, monthly payments DOWN, and make the cost of owning a home more affordable,” Trump wrote on Thursday afternoon. “It is one of my many steps in restoring Affordability, something that the Biden Administration absolutely destroyed.”
US housing finance director Bill Pulte told the FT the purchases would be made by a “mixture” of Fannie Mae and Freddie Mac, the two government-sponsored enterprises tasked with buying lenders’ mortgage loans and repackaging them as mortgage-backed securities.
“We’re going to be using the full force of Fannie to reverse the damage that [former president Joe] Biden did these last four years, including, but not limited to, strategic and large purchases of mortgage bonds,” he said.
The move would not require congressional authorisation, Pulte added.
The Trump administration is seeking to push down mortgage rates through buying debt in one of the world’s biggest fixed-income markets. There is $11tn in US mortgage-backed securities outstanding, with trading volumes averaging about $300bn a day, Federal Reserve research shows.
The announcement late on Thursday boosted shares in US mortgage specialists: Rocket Companies jumped 6 per cent, loanDepot soared 14 per cent and United Wholesale Mortgage gained 7 per cent.
It comes as Trump has faced criticism from many Americans, who say they can no longer afford to maintain an adequate standard of living following a surge in the cost of many essential goods since the coronavirus pandemic.
The president had on Wednesday said he would seek to restrict institutional investors from buying single-family homes, a factor that has sometimes been cited as depressing inventories.
Trump has previously claimed the affordability crisis was a “hoax”.
High housing costs, including mortgage rates, have proven one of the most pressing challenges facing US policymakers.
The average rate on a 30-year mortgage — the most popular product — is 6.16 per cent, despite multiple cuts to benchmark borrowing costs by the Fed.
The Fed cut its benchmark federal funds target range by 0.75 percentage points last year, lowering the short-term rate to 3.5 per cent to 3.75 per cent.
Trump has pressed the central bank to sharply lower interest rates to boost the economy and lower borrowing costs for homebuyers.
His plans for large-scale bond purchases echo those of the Fed in the aftermath of the 2008 financial crisis, when rate-setters bought debt from Fannie Mae and Freddie Mac in an attempt to shore up the financial system and boost the economy.
As of this week, the central bank held $2tn in mortgage bonds.
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