On Friday, the average 30-year fixed mortgage rate registered at 5.99%, marking its first occurrence below the symbolic 6% mark since 2022. This development, reported by Zillow, comes amid forecasts from financial experts anticipating additional downward movement in mortgage rates shortly.
The key driver behind this improvement can be traced to a recent government intervention intended to stimulate the mortgage market. Under a directive announced Thursday, President Donald Trump instructed Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation) to acquire $200 billion in mortgage-backed securities (MBS). These two government-sponsored enterprises (GSEs) retain significant cash reserves and are now leveraging these funds to bolster demand in the mortgage bond market.
Increasing the purchase volume of mortgage bonds pushes bond prices upward. Since bond yields and prices move inversely, higher prices precipitate lower yields. Mortgage interest rates generally align with these yields; hence, an increase in bond prices ultimately translates into reduced mortgage rates for borrowers.
It is notable that prior to this directive, Fannie Mae and Freddie Mac had already been increasing their mortgage holdings. Specifically, during the latter half of 2025, their combined retained mortgage portfolios rose by approximately $50 billion, suggesting a gradual approach toward market stabilization.
A central objective of this intervention is addressing the mortgage spread. The mortgage spread represents the differential between the 10-year Treasury yield and the 30-year fixed mortgage rate. A narrower spread typically indicates a more favorable borrowing environment, as mortgage rates approach the lower Treasury benchmark.
Industry observers have acknowledged the immediate impact of these policy measures. Lance Lambert, co-founder and editor-in-chief of ResiClub, cited an "immediate bond market reaction" following the announcement on Thursday afternoon. The mortgage spread tightened to 187 basis points on Friday, approaching the historical average of 176 basis points, a development instrumental in precipitating the notable mortgage rate drop.
Further commentary from Matt Graham, CEO of MBS Live, reinforced the assessment that the recent rate decline is closely linked to the GSEs' expanded MBS purchases. While noting that further reductions may experience diminishing returns as the spread tightens, Graham projected the possibility of additional rate decreases up to 50 basis points. To illustrate, the current 6.125% mortgage rate could potentially decline to 5.625%, provided there is no concurrent change in the broader bond market yields.
The Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation, commonly recognized as Fannie Mae and Freddie Mac respectively, occupy pivotal roles in this strategy. Fannie Mae reported a recent share price of $11.01 with a 1.47% gain, while Freddie Mac's shares traded at $10.21, reflecting a 1.29% increase. Their active involvement in purchasing mortgage-backed securities underpins the market adjustments underway.
Ultimately, this strategic deployment of $200 billion by the GSEs to influence bond market behavior demonstrates a calculated effort to reduce mortgage rates for American homeowners and prospective buyers, fostering an environment conducive to refinancing and home acquisition amid fluctuating interest rate conditions.