Did Trump just make interest rates plummet?

I was working away yesterday when I glanced at mortgage bonds and saw they had shot into the green 30 basis points. I was like uhh what happened?!  Then I opened Instagram and everyone was losing their minds about Trump’s announcement that he’s directing the government to purchase $200 billion in mortgage-backed securities in order to lower mortgage rates. This is called quantitative easing and is the other, less known, level the Fed has at its disposal to stimulate the economy. Let’s get you up to speed on market sentiment today including what the market isn’t really reacting to.  

On the Surface 

Trump wants lower rates and claims this plan will drive mortgage rates down making homeownership more affordable through lower monthly payments. His critics say lower rates will increase demand and the inventory doesn’t exist to support that, so affordability will actually suffer as prices go up. I actually talked about that a lot on yesterday’s webinar. Not Trump, but the inverse impact of lower interest rates on affordability. Trumps supporters were quick to respond that home values going up benefits a lot of Americans who own homes and will see their equity position further improve. Nevermind that wasn’t what Trump said his goal was with lower rates. 

How this actually works in case you aren’t familiar with quantitative easing.

When the demand for mortgage bonds increases, the price of mortgage bonds increases as well. That causes yields to fall which brings mortgage interest rates down. Quantitative easing isn’t typically focused solely on mortgage bonds though. QE is when the central bank buys large amounts of treasuries including government bonds as well as other financial assets to inject money into the economy and lower long-term interest rates. Most are familiar with how the Fed lowers short term rates – cutting the Federal Funds Rate. So this is their level for long term borrowing costs like mortgage rates. It’s typically done when cuts to the Fed Funds Rate are not enough to stimulate the economy, it’s typically done during crises because it can risk major inflation. 

We saw an immediate tightening on MBS spreads which is why we were up on mortgage bonds right away. The impact is already fading as I write this blog midday Friday. And it might be because even if mortgage bond purchases tighten MBS spreads initially, it doesn’t guarantee large moves in underlying Treasury yields or long-term rates for all borrowers. The spreads we have discussed here before still matter. 

JOBS DAY 

Trump kind of took the wind out the jobs data’s sails with his announcement yesterday but we did get numbers this morning. Today’s US Jobs Report showed only 50k jobs added in December, while the market was expecting more. However, unemployment rate ticked down to 4.4% which could also be why we are giving up our gains from yesterday. This complicates the narrative for sure, because while 50k jobs added is the slowest pace we’ve seen in a while – if unemployment rates are improving, maybe the jobs market is ok?! 

Here's the deal, to keep it simple. Weak hiring, only 50k jobs added would push the Fed towards rate cuts. But a low unemployment rate indicates a labor market that is actually tight, which pushes the Fed to hold steady against inflation concerns which are still real. That weird combo of data released this morning is probably why the market didn’t give us much of a reaction at all. 

Rates remain sticky. 

This is why 2026 is expected to be a transition year, not the year of free-falling interest rates and frenzied competition. It could happen; we could see rates crash but every attempt they’ve made at doing so – they’ve quickly been checked by the market. I will tell you, when rates move like they did yesterday, we immediately see a pickup in activity and mortgage applications. More buyers shop and lock quickly when the markets hint at cheaper money. 

I did a webinar this week for buyers on how to take advantage of the window we are seeing right now, instead of waiting for hypotheticals. If you missed it, I’d recommend both watching and sharing it with people you care about. Headlines like a $200B MBS directive create perceived opportunity but what we really need is clarity in our strategy. I’m on a mission in 2026 that no first-time homebuyer gets left behind. I believe this will be their last best entry point into the market for some time.