Mortgage rates just fell below 6% for the first time in years

Core Insights - Mortgage rates have fallen below 6% for the first time in years due to President Trump's directive to purchase $200 billion in mortgage bonds, aimed at reducing costs for Americans facing high living expenses [1][3] - The average interest rate for a 30-year fixed mortgage dropped to 5.99%, down from 6.21%, marking the lowest rate since February 2023 [1][2] Mortgage Rate Trends - The average 30-year mortgage rate has decreased by more than 1% over the past year, with the 15-year fixed rate mortgage also seeing a significant drop to 5.55% [2] - The recent changes in mortgage rates are unusual, as they typically fluctuate slowly [2] Government Actions - Trump's announcement led to an immediate reduction in mortgage rates, with the Federal Housing Finance Authority indicating that Fannie Mae and Freddie Mac would execute the bond purchases [3][5] - Fannie Mae and Freddie Mac currently hold over $230 billion in mortgage securities, and an additional $200 billion purchase would nearly double their holdings [4] Market Dynamics - The purchase of bonds by Fannie Mae and Freddie Mac increases the liquidity for lenders, allowing them to lend more to homebuyers, which generally leads to lower mortgage rates [5] - Analysts at UBS suggest that Trump's bond buying plan could reduce 30-year fixed mortgage rates by more than 0.2%, potentially boosting new construction and existing home sales [6] Limitations of the Plan - The average interest rate for existing residential mortgages is 4.4%, which may limit the impact of the bond buying plan on homeowners reluctant to sell due to lower rates [7] - JPMorgan Chase analysts noted that $200 billion in mortgages represents only about 1.4% of the $14.5 trillion mortgage market, suggesting limited overall market impact [8]