$200 billion big move, Trump takes action to lower mortgage rates

The Trump administration has launched a large-scale mortgage stimulus program. According to the latest news, President Trump announced that he will instruct relevant agencies to purchase a total of $200 billion in mortgage-backed securities (MBS), jointly executed by Fannie Mae and Freddie Mac. The goal is to lower mortgage rates and reduce monthly payments. This initiative does not require Congressional approval and is expected to be implemented quickly within the existing agreement framework, with each agency potentially adding up to approximately $100 billion in MBS capacity.

Policy Core Analysis

Scale and Implementation Mechanism

This $200 billion purchase plan is substantial. Specifically:

The advantage of this design is that it leverages existing agreements for direct execution, avoiding cumbersome Congressional approval processes, and can release liquidity to the market more quickly. The Director of the Federal Housing Finance Agency, Bill Pulte, also confirmed this approach.

Policy Background and Objectives

Currently, the average interest rate for 30-year fixed mortgages is about 6.16%, which puts significant monthly payment pressure on homebuyers. The Federal Reserve has cut interest rates by a total of 75 basis points over the past year, but the transmission of this easing policy seems not to be direct enough. The Trump administration’s move aims to increase the supply of mortgage-backed securities in the market through direct MBS purchases, thereby pushing up their prices and consequently lowering mortgage rates.

The underlying logic is clear: increase MBS supply → raise MBS prices → lower mortgage rates. In theory, this is a relatively direct transmission mechanism.

Market Impact Analysis

Short-term Effects

The real estate and mortgage markets will be most directly affected. If mortgage rates indeed decline, homebuying costs will decrease, potentially stimulating demand in the real estate market. At the same time, this will influence MBS market pricing and liquidity.

Macroeconomic Perspective

This policy reflects the Trump administration’s economic approach: large-scale government intervention and liquidity injection. According to relevant analyses, such large-scale deficit spending and credit expansion policies may boost inflation expectations, which could influence asset allocation. Some market observers believe that this easing environment could be positive for risk assets like Bitcoin, as investors seek hedges against inflation and currency devaluation.

Variables to Watch

The actual effectiveness of this policy depends on several factors:

• Actual demand for MBS in the market
• Progress of Fannie Mae and Freddie Mac’s implementation
• Performance of other economic data (e.g., employment, inflation)
• The Federal Reserve’s subsequent policy stance

Future Outlook

If this policy is implemented smoothly, mortgage rates are expected to decline significantly in the medium term. However, achieving noticeable stimulative effects will also depend on actual transaction volumes. Additionally, the inflationary pressures resulting from this large-scale liquidity injection will require subsequent policies to balance.

From a broader perspective, this reflects the Trump administration’s tendency to use government intervention to achieve economic goals. While such measures may stimulate growth in the short term, their long-term effects remain to be seen.

Summary

The Trump administration’s $200 billion MBS purchase plan is a sizable mortgage stimulus policy with clear objectives and relatively efficient implementation mechanisms. It demonstrates the current U.S. government’s approach of large-scale liquidity release, which is expected to stimulate the real estate market and the overall economy to some extent. The key factors to watch are the actual implementation results, market reactions, and the long-term impact of this easing policy on inflation and asset prices. Market participants should continue to monitor changes in mortgage rates, demand in the real estate sector, and how this policy interacts with other economic policies.