Mortgage rates fall near 6% with GSEs set to boost MBS purchases

For the first time in months, mortgage rates made significant downward progress last week. But the question for housing professionals is whether the trend will last.

Mortgage News Daily reported Monday that the average 30-year fixed-rate loan averaged 6.01%, down 18 basis points in the past week. MND data shows that rates haven’t been this low since February 2023.

At HousingWire’s Mortgage Rates Center — which analyzes locked loans across all borrower credit profiles — 30-year conforming loan rates averaged 6.26% on Tuesday. That was down 11 bps from one week ago. Rates for 30-year jumbo loans averaged 6.26%, down 1 bps, while rates for 30-year Federal Housing Administration loans shed 3 bps to average 6.06%.

Last week, the market responded to President Donald Trump’s directive for Fannie Mae and Freddie Mac to purchase $200 billion in mortgage-backed securities (MBS). Rates briefly dipped below 6% on Friday, prompting lenders to begin preparing for a potential refinance surge.

In an email interview with HousingWire, Phil Crescenzo Jr., Southeast division vice president at Nation One Mortgage Corp., said that Trump’s announcement was “welcomed immediately by the bond market as a positive sign for the future.” But he cautioned that was too early to know whether rates would remain lower for longer.

“Markets often react to change in trajectory and indicators that point to stability,” Crescenzo said. “If future purchases were projected or announced, this could create an increase in bond price, resulting in lower interest rates to the consumer.”

While relatively small changes in rates might not spur every purchase or refinance borrower to come off the fence, Crescenzo said those with high rates who’ve waited a while are now in prime position to act.

“Using $400,000 as a loan amount, the difference of .25% may not be significant, but if a buyer had looked previously with interest rates at 7%, for example, versus a 6% rate for the same loan, the monthly difference is significant, at $263.00 monthly,” he wrote.

Will the GSEs do what the Fed hasn’t?

By purchasing hundreds of billions of dollars in MBS, the government-sponsored enterprises (GSEs) could spur the lower mortgage rates that Trump and other officials have been clamoring for.

Despite lowering benchmark interest rates by a total of 75 bps in 2025, the actions of the Federal Reserve have yet to have a transformative effect. But compared to early September, prior to the three subsequent Fed cuts, 30-year rates are about 40 bps lower.

Victor Kutnetsov, co-founder and managing director at Imperial Fund Asset Management, said last week that rates have dropped by roughly 35 bps after the GSEs increased their MBS purchases to $15 billion per month in October and November. And after Trump’s announcement last week, Fannie Mae 5.0 MBS spreads tightened by some 75 bps.

“Here’s what that means: In the short term, expect mortgage rates to level tighter than 2025 averages, but investment bank researchers tend to agree that most of these MBS purchases have already been priced into rates, so the timing of the GSEs’ MBS purchases will be important,” Kuznetsov said.

“Will the GSEs purchase $200B over 2026’s calendar year, spreading out the tightening effects over a full year? Details on deployment timing have been sparse so far.”

Michelle Parkinson, senior vice president of capital markets at non-QM specialist AD Mortgage, also said that timing matters and that the long-term impacts of the MBS purchases are unknown.

“In the short-term, the increased demand lowers rates, which will help homebuyers afford the high home prices,” Parkinson said in a statement. “Long-term, if this is a one-time purchase, rates will adjust back to normal ranges depending on the economic landscape at that time.

“The administration instructing Fannie and Freddie to buy mortgage bonds is just one initiative in the quest to lower mortgage bonds for a substantial period of time.”

Will borrowers take the leap?

More good news for mortgage rates and potentially improved housing affordability arrived in the form of the December employment report, which showed modest job gains last month, and in the Consumer Price Index report, which found that inflation remained flat in December at 2.7% annually.

But market observers believe the Federal Reserve is done adjusting benchmark rates for now. The CME Group’s FedWatch tool shows that 97% of interest rates are calling for no change in the federal funds rate after the conclusion of the Fed’s Jan. 27-28 meeting.

Still, rates are in place where homebuyers and sellers are more likely to act. And that’s creating more optimism for some lenders.

“With 30-year fixed mortgage rates hitting an almost three-year low, this is great news for housing,” said Jeff DerGurahian, chief investment officer and head economist at loanDepot.

“Anytime rates move lower, it improves affordability and helps more buyers qualify, while also creating opportunities for homeowners to refinance. We’ll be watching closely for details on the timing and cadence of Fannie and Freddie’s MBS purchases, as that will shape the longer-term impact and direction of rates.”

Crescenzo said recent conversations with borrowers represent a shift from where they were a year or two ago.

“Buyers today are less focused on rates due to the conditioning of the market, and how consistent rates have been over the last few years,” he wrote. “They are always concerned about monthly payment, budgets, and the overall process, but the unrealistic expectations that were started during the pandemic era have become much more reasonable.

“I have also needed far less buyers waiting out for a large rate reduction or comparing terms to 2021 eras. Any reduction to interest rates certainly helps in creating more conversations and opening more doors.”