Mortgage Rates Dip Below 6% as Trump Pushes $200B MBS Buyback

Mortgage rates in the U.S. have fallen to their lowest level in over three years, with the average 30-year fixed-rate mortgage hitting 6.027% as of Jan. 15, 2026. The drop has sparked a surge in homebuying and refinancing activity, with demand for refinancing rising sharply after a single week of declining rates. This decline is largely attributed to a bold move by President Trump, who announced a $200 billion buyback of mortgage-backed securities (MBS) through Fannie Mae and Freddie Mac.

What Caused Mortgage Rates to Drop Below 6% in 2026?

Mortgage rates have long been influenced by the Federal Reserve's monetary policy, but the recent drop was accelerated by a unique intervention. Fannie Mae and Freddie Mac, which are in government conservatorship, play a crucial role in the housing market by purchasing mortgages from lenders and packaging them into MBS for investors. The $200 billion buyback essentially replenished lender funds, increasing the money supply for new loans and lowering interest rates.

The market responded immediately, with the 30-year rate dropping below 6% and the 15-year rate falling to 5.55%. Analysts at UBS estimate the impact could bring the 30-year rate down to around 6.0%, improving affordability for many potential buyers. This is especially significant given that nearly 69% of U.S. homes with an outstanding mortgage have a fixed rate of 5% or lower, and over half are at or below 4%.

Why Is the Mortgage Rate Drop Important for Investors and Homebuyers?

The drop in mortgage rates has immediate implications for both homebuyers and investors in the real estate market. For buyers, the lower rates improve purchasing power and create a window of opportunity in a market that has been constrained by high prices and elevated borrowing costs for years. For investors, particularly those in homebuilder stocks, the rate drop could stimulate demand for new homes, as lower borrowing costs may encourage more home construction and turnover.

However, the market is still far from a return to the ultra-low rates seen during the pandemic. Experts predict a gradual decline in rates but not a return to the 3% levels of 2020 and 2021. Factors like inflation, national debt, and the Fed's balance sheet management will continue to influence the trajectory of mortgage rates.

What to Watch for in the Coming Months

While the $200 billion MBS buyback is a major factor in the current rate drop, long-term affordability issues remain. High home prices, high down payment requirements, and stretched household budgets continue to limit the impact of lower rates for many first-time buyers.

Additionally, the Federal Reserve's approach to interest rates in 2026 will play a key role in shaping mortgage market conditions. The Fed has indicated a single rate cut in 2026 but has not signaled it as a near-term move. This means that while there may be continued softening in rates, significant drops are unlikely in the immediate future. Investors and homebuyers should also keep an eye on broader economic conditions, such as inflation trends and housing supply developments. For homebuyers, now may be a strategic time to act if they are prepared to navigate the high-price market and secure a better mortgage rate.