Quantitative Easing Has Begun: Is It Enough to Meaningfully Lower Mortgage Rates?

For years, investors were guided by “Don’t fight the Fed,” but today the more relevant theme may be “Don’t fight the administration,” as policy shifts increasingly shape key markets like housing. The Trump administration’s focus on affordability has put mortgage costs in the spotlight, with a proposed $200 billion agency MBS purchase program via Fannie Mae and Freddie Mac signaling direct support for lower mortgage spreads. While this amount is small relative to the $9 trillion-plus agency MBS market, it could absorb much of next year’s net supply and act as a steady bid that tightens spreads over time.

The dynamic is further complicated by ongoing Fed balance sheet runoff, which was already priced into spreads, making this new GSE buying program an incremental positive for valuations. For advisors and investors, agency MBS now sit at the intersection of politics and policy: there is potential upside from persistent spread support, but meaningful declines in mortgage rates will still depend on broader macro forces such as inflation trends and labor market strength.