Unlock the White House Watch newsletter for free
Your guide to what Trump’s second term means for Washington, business and the world
The benchmark US mortgage rate has dropped below 6 per cent for the first time in more than three years, potentially offering relief to borrowers and likely bolstering Donald Trump’s claim that housing is becoming more affordable under his administration.
The 30-year rate averaged 5.98 per cent as of Thursday, bringing it to its lowest level since September 2022, government-backed housing entity Freddie Mac reported.
Housing affordability has become a pressing political issue for the White House in the run-up to November’s midterm elections.
During Trump’s State of the Union address on Tuesday, he pointed to falling mortgage rates and his move to ban institutional investors from buying single-family homes as examples of the ways the housing affordability crisis is easing during his term.
“Low interest rates will solve the [Joe] Biden-created housing problem, at the same time protecting the values of those people who already own a house, that really feel rich for the first time in their lives,” the president said in his speech.
“We want homes for people, not corporations,” he said as he pressured Congress to pass a law banning institutional investors from purchasing single-family homes.
US housing market activity has been weak since the Federal Reserve began lifting borrowing costs in 2022 in an attempt to tame inflation, which had reached historic highs following the Covid-19 pandemic. Mortgage rates hit a 23-year high of about 7.8 per cent in October 2023.
Since his second inauguration, Trump has been putting pressure on the Fed to bring down its benchmark interest rate. Last month, he directed Fannie Mae and Freddie Mac to purchase $200bn in mortgage-backed securities with the aim of further lowering borrowing costs.
With mortgage rates sliding through 2025, there were some signs of the US housing market stirring late in the year. Single-family housing starts, which account for the majority of homebuilding activity, hit a five-month high in December, while new home sales in November hit their highest since March 2022, when the Fed commenced its policy-tightening cycle.
Existing home sales, though, fell 8.4 per cent in January, according to the National Association of Realtors.
Realtor.com economist Jiayi Xu cautioned that this week’s decline in the 30-year rate “stems from market volatility rather than fundamental economic data” and therefore “the path forward remains uncertain”. She said, though, that “a lower rate could possibly bring more homeowners who were previously ‘locked in’ to finally enter back into the market”.
Locked-in homeowners are those with lower mortgages than the market rate. They are often less likely to sell their homes until the market rate comes down, which can lead to less available housing.
Source link
