Could the Trump Administration Force Mortgage Rates Lower?

Mortgage rates have been hovering in the 7-8% range for much of the last few years. Even today, with rates around 6% many buyers remained sidelined and homeowners feel like rates aren't low enough to warrant a refinance. But relief may be on the horizon.

A new proposal urges Fannie Mae and Freddie Mac to stop waiting for the Fed to take action and instead step in and narrow the mortgage rate spread – the gap between mortgage rates and 10-year Treasury yields – which would lead to lower mortgage rates and fresh opportunities for homeowners to save.

In this article, we break down what this government mortgage intervention entails and, most importantly, what it could mean for your wallet.

Why the Mortgage Rate Spread Matters

Understanding the Spread

While the Fed funds rate dominates headlines, it's not the best predictor of mortgage rates. In reality, mortgage rates tend to follow the yield on the 10-year U.S. Treasury bond. That’s because Treasuries and mortgage-backed securities compete for the same pool of investors.

The gap between these two rates is known as the mortgage rate spread—or the 30/10 spread—and it’s a critical indicator of how efficiently the mortgage market is functioning. Historically, 30-year fixed mortgage rates sit about 1.5% to 1.7% above the 10-year Treasury yield. But lately, that spread has been unusually wide.

As of mid-October 2025, the gap stood around 2.22%, well above normal levels, and it's been that way for some time. That extra margin directly erodes home affordability. Fewer people can afford loans, and those who do qualify can afford less house. The result? Some of the slowest home sales activity we’ve seen in decades.

In short: the rate spread is too wide. And fixing it could bring mortgage rates down without the Fed lowering interest rates.

A Government Plan to Nudge Rates Lower

Two powerful trade groups – the Community Home Lenders of America and the Independent Community Bankers of America – recently proposed that Fannie Mae and Freddie Mac temporarily purchase mortgage-backed securities (MBS) when the spread gets too wide.

Why This Could Work

Increasing demand for mortgage bonds pushes down MBS yields. Lower MBS yields mean lenders can offer lower mortgage rates. Fannie and Freddie would effectively become buyers of last resort when no one else steps in.

The proposed trigger? Let the GSEs buy up to $300 billion in MBS whenever the spread exceeds 170 basis points. This isn’t about long-term government control. It’s a tactical move to restore balance in a skewed market. And the GSEs already have room under their current caps to start buying immediately.

How Much Could Rates Drop?

The trade groups estimate this intervention could reduce mortgage rates by about 0.25-0.5%. That may not sound like much, but in mortgage terms, it’s significant.

Real Numbers, Real Savings

Let’s say your 30-year fixed mortgage is at 7.00%. Rates are currently around 6%. If rates drop to 5.50% just because of the MBS purchases from the goverment, your monthly principal and interest payment would decrease from about $3,327 at 7% to $2,838 at 5.5%—a difference of roughly $489 per month.

And it’s not just monthly savings. It’s about building equity faster, reducing total interest paid, and creating more flexibility in your household budget.

If You Bought Between 2023 and 2025, Pay Attention

Did you buy when rates were high? You’re not alone. Millions of Americans locked in 30-year fixed loans at 6.5% to 7.5% over the past two years. Refinancing into a lower rate now could free up cash and speed up your wealth-building.

Even a modest refi from 7.00% to 6.75% could save you $65/month on a $400,000 loan. And if rates drop more, you can refinance again. You don’t get just one shot.

A Special Opportunity for Veterans

Veterans: you’re in an even stronger position. The VA’s streamlined IRRRL refi process lets eligible borrowers roll down their rate with no appraisal and minimal paperwork. If you’re sitting at 6.75% or higher, this is a moment to watch.

Buyers Could Benefit Too

Lower rates don’t just help existing homeowners. If this plan succeeds, more buyers will qualify for loans. That could revive activity in entry-level markets and bring first-time buyers back into the fold. With mortgage affordability improving even slightly, more renters could cross over into ownership, and move-up buyers could finally make their next move without facing a drastic jump in payment.

The Catch: More Demand, Same Tight Inventory

But more demand also means more competition. Inventory is still tight, and a wave of rate-motivated buyers could put upward pressure on prices—especially in markets that are already hot. Entry-level homes, which have seen the biggest affordability challenges in recent years, may see the sharpest uptick in demand.

The message to buyers: be ready. Have your pre-approval in hand, your budget dialed in, and a strategy to act quickly when the right home hits the market. Getting organized now gives you the edge when others are just starting to scramble.

Timing Is Everything

If the Treasury and FHFA adopt this proposal, rates could drop fast. When they do, we won’t be talking about gradual, predictable movement—we’re likely looking at sharp pivots where lenders and brokers are suddenly flooded with applications. That’s what we saw during the early COVID-era rate drops. The best-prepared borrowers locked in the best deals. Everyone else scrambled.

Mortgage lenders only have so much capacity. When applications surge, response times slow down. Turnaround times stretch. And rate locks become harder to time. In some cases, by the time a borrower is ready, the best rates have already disappeared. That’s why preparation isn’t optional—it’s strategic.

What You Should Do Right Now

If you want to benefit from a rate drop, you need to be positioned before it happens:

• Run your refinance numbers. Know how much you could save and where your break-even point is.

• Set your target rate. Decide what rate makes refinancing or purchasing worthwhile.

• Get pre-approved. This isn’t a commitment; it’s leverage. It gives you speed and credibility.

• Sign up for rate alerts. Let us track the market so you don’t have to. When your target hits, you’ll be the first to know.

Being ready isn’t about guessing the market perfectly. It’s about making sure you can act the moment the math makes sense. The sooner your file is prepped, the faster you can take advantage of any market shift.

This way, you’ll be first in line when the opportunity hits—and that can make all the difference.

Get Ahead With LendFriend

Whether you’re a homeowner with a 7% mortgage or a first-time buyer watching rates, the goal is the same: be ready.

Lower rates could be around the corner. This proposal might be the spark that sets it off. Don’t wait for headlines. Set yourself up to act. Sign up for LendFriend’s Rate Alert Tool. Know the moment your opportunity arrives.

Apply today. Preparedness is your advantage. Get ahead of the crowd.

Let’s talk about your goals and figure out the best way to help you refinance or buy today. Give us a call at 512.881.5099 or reach out to us here. We’d love to be your partner in the process.