Trump's $200B Mortgage Plan: Why Experts Say It's Failing

The Trump administration's $200 billion plan to purchase mortgage-backed bonds was designed to make housing more affordable. However, early evidence suggests the initiative is having a negligible effect, with economists arguing it misdiagnoses the core problem facing the U.S. housing market.

Experts widely agree that the key to affordability is not cheaper financing but a significant increase in housing supply. Meanwhile, geopolitical tensions, driven in part by the administration itself, threaten to push borrowing costs higher, potentially canceling out any marginal benefits from the program.

Joseph Brusuelas, chief economist at RSM US LLP, called the bond purchases "mostly an exercise in burning cash." He added, "The U.S. does not have a demand or financing problem within the housing complex; it has a supply problem, and $200 billion in [mortgage bond] purchases is not going to do anything to bring relief to Americans on the housing front."

A Look at the Numbers: Marginal Impact on Rates

Long-term mortgage rates were already declining before the new policy, largely due to the Federal Reserve's cuts to its short-term interest rate. According to data from Freddie Mac, the average rate on a 30-year fixed-rate mortgage fell from a peak of nearly 8% in the fall of 2023 to 6.15% by the end of 2025.

After the administration directed Fannie Mae and Freddie Mac to begin buying bonds, the rate briefly touched 6.06%, its lowest point since 2022. However, it quickly edged back up to 6.09%.

Figure 1: The 30-year average mortgage rate has trended down significantly from its 2023 peaks, but the effect of the new bond-buying program appears limited amid broader market movements.

Separately, the Mortgage Bankers Association reported that its measure of 30-year mortgage rates fell to its lowest level since September 2024, fueling a surge in refinancing activity to its highest point since September 2025.

Patricia Zobel, a former manager at the New York Fed and current head of macroeconomic research at Guggenheim Investments, remains skeptical. "It's not clear to me how much this will materially lower housing prices for consumers, but we'll see," she commented, while noting that mortgage bond yields have narrowed slightly relative to Treasury bonds.

A Strategy to "Sterilize" the Fed's Runoff

Administration officials have provided few details on the purchases, but Treasury Secretary Scott Bessent explained that a key objective is to offset the Federal Reserve's ongoing reduction of its own mortgage bond holdings. The Fed has been allowing bonds acquired during the pandemic to mature without replacement.

Bessent stated the administration's buying pace would "roughly match" the roughly $15 billion in mortgage bonds rolling off the Fed's balance sheet each month. This plan to "sterilize" the Fed's runoff is viewed with skepticism by many economists. Most analysts agree that the market impact of the Fed's balance sheet changes comes primarily from the initial announcement, not the gradual runoff itself. They argue that the central bank's modest reduction in holdings—from $2.7 trillion in mid-2022 to $2 trillion—is creating no measurable upward pressure on home borrowing costs, questioning the need for an offsetting action.

Fed Officials Point to the Supply Crisis

Federal Reserve officials have also indirectly expressed doubts about the program's effectiveness, consistently pointing to the supply side of the housing equation.

"I do think that a lot of the housing affordability challenges are about more than just financing, and there's a supply and demand issue that has persisted in many major markets," said Atlanta Fed President Raphael Bostic in a January 9 interview.

Minneapolis Fed President Neel Kashkari was more direct. "The biggest barrier for the housing market is supply," he said. "Anything we can do to help get out of the way of allowing more supply to come online... that will help the housing market probably more than anything else."

Geopolitical Headwinds Could Push Rates Higher

Even if the bond-buying program were to lower rates, external factors could easily reverse the effect. A recent selloff in Japanese bonds has caused yields on longer-dated government bonds to spike, putting upward pressure on U.S. rates.

Furthermore, President Trump's own actions on the global stage, including tariff threats and diplomatic friction with allies over issues like the proposed purchase of Greenland, may be diminishing the appeal of U.S. assets. This could weaken demand for Treasuries, which would in turn push borrowing costs higher. The 10-year Treasury note yield, which heavily influences mortgage rates, recently rose to its highest level since August, creating a significant headwind for anyone hoping for lower mortgage payments.