What happened to mortgage rates this week?
The Freddie Mac 30-year fixed mortgage rate dropped by 10 basis points to 6.06% this week, marking its lowest level in more than three years. Mortgage rates first climbed above the 6% threshold in fall 2022 and have remained elevated since, contributing to strained affordability conditions and a persistent mortgage lock-in effect.
The average 30-year mortgage rate was 6.06% through Wednesday, down from 6.16% last week, according to Freddie Mac data.
Last week, President Donald Trump announced that he was instructing Fannie Mae and Freddie Mac to buy $200 billion in mortgage-backed securities. The announcement triggered a sharp decline in mortgage rates as MBS prices surged, since higher MBS prices generally translate into lower borrowing costs for consumers. This source of rate volatility largely overshadowed the December jobs report, which sent mixed signals with softer-than-expected payroll growth alongside an improved unemployment rate.
What it means for the housing market
December existing-home sales increased both month over month and year over year as buyers responded to easing mortgage rates and gradually improving inventory levels. At the same time, the share of homeowners with mortgage rates above 6% now exceeds the share below 3%, signaling a slow shift in the housing market as some homeowners with ultralow-rate mortgages begin to trade up or relocate despite higher borrowing costs. We expect mortgage rates to remain relatively steady in the low 6% range this year, which could support modestly improving home sales in 2026. Even so, affordability constraints and the remaining stock of low-rate mortgages suggest any recovery in home sales is likely to be gradual rather than rapid.
In practical terms, an announcement like that would mean the government is trying to support the housing market and keep mortgage rates lower by injecting a large amount of money into the mortgage system. Here’s how to understand it in plain language—and with some important context.
What buying mortgage-backed securities (MBS) does
Mortgage-backed securities are bundles of home loans that investors buy. When a major government-backed entity buys a large amount of these securities:
• More cash flows into the mortgage market
• Lenders get replenished capital, allowing them to issue more home loans
• Mortgage interest rates tend to fall or stabilize
• Housing demand is supported, especially during economic uncertainty
For consumers, this usually translates into cheaper borrowing costs for buying or refinancing a home.
Why Fannie Mae and Freddie Mac matter
Fannie Mae and Freddie Mac are government-sponsored enterprises that underpin most of the U.S. mortgage market. They don’t typically set policy on their own; they operate under federal oversight. Their role is to ensure liquidity, stability, and affordability in housing finance.
Important clarification
Historically, large-scale purchases of mortgage-backed securities (such as $200 billion at once) have usually been carried out by the Federal Reserve, not directly by Fannie Mae or Freddie Mac. The Fed used this tool extensively during crises (like the 2008 financial crisis and the COVID-19 pandemic) to stabilize markets.
So if a president announced something like this:
• It would signal a strong pro-housing, pro-liquidity stance
• It would likely be aimed at preventing rising mortgage rates, slowing home sales, or broader economic stress
• The actual execution would still depend on existing legal authority and coordination with federal regulators
Bottom line
An announcement like this means the government is attempting to stimulate the housing market, protect home values, and make mortgages more affordable, especially during economic volatility. For buyers, sellers, and homeowners, it’s generally seen as a short-term positive for mortgage rates and housing activity.
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