Something interesting happened in the mortgage market on Friday: rates dropped below 6% for the first time since 2022. The average 30-year fixed mortgage rate hit 5.99%, according to data from Zillow. And here's the kicker—experts think they're heading even lower.
How a $200 Billion Plan Moves Markets
The drop didn't happen in a vacuum. On Thursday, President Donald Trump announced he's directing Fannie Mae (FNMA) and Freddie Mac (FMCC) to buy $200 billion worth of mortgage-backed securities. The mechanics here are straightforward: these government-sponsored enterprises have roughly $200 billion sitting in cash reserves. By deploying that cash to buy mortgage bonds, they increase demand, which pushes bond prices up and yields down. Lower yields mean lower mortgage rates.
This isn't entirely new territory for Fannie and Freddie. They'd already increased their retained mortgage holdings by about $50 billion in the second half of 2025. But Trump's directive accelerates the strategy dramatically.
The Mortgage Spread Gets Squeezed
The real target here is what's called the mortgage spread—the gap between the 10-year Treasury yield and the 30-year fixed mortgage rate. When that spread is wide, mortgages are expensive relative to government bonds. When it tightens, homebuyers get a better deal.
The bond market reacted immediately to Trump's announcement. Lance Lambert, co-founder and editor-in-chief of ResiClub, noted that Friday's spread compressed to 187 basis points, close to the historic average of 176 bps. He described it as a "BIG ONE-DAY MORTGAGE RATE DROP."
Matt Graham, founder and CEO of MBS Live, also attributed the decline to Trump's move and sees room for more. "There are diminishing returns to additional MBS purchases as this spread continues to compress, but it's not overly optimistic to think it could result in another 50bps of tightening in the best case," Graham said.
Translation: Today's 6.125% mortgage rates could drop to 5.625% without any broader movement in the bond market. That's a meaningful change for anyone shopping for a home.