John’s Finance Corner: Mortgage Rates Improve as Affordability Takes Center Stage
Mortgage interest rates have shown meaningful improvement over the past 6–12 months, and as we head into 2026, there’s growing optimism that additional relief could be on the way.
As the new year begins, one word is likely to dominate economic and housing conversations: affordability. With mid-term elections approaching this fall, the current administration has placed a strong emphasis on homeownership and housing accessibility. Several initiatives have already been introduced, with more expected, all aimed at strengthening the economy, improving affordability, and making the path to homeownership more attainable for buyers nationwide.
Last week, President Trump announced that Fannie Mae and Freddie Mac will deploy approximately $200 billion in available funds to purchase mortgage-backed securities. The goal of this initiative is to free up capital for banks and lending institutions while narrowing the spread between bond yields and mortgage rates.
Historically, that spread has averaged between 1.6% and 2.0%. During the peak of mortgage rates in 2023, the spread widened significantly to roughly 3.1%. As of last week, the spread had improved to about 2.12%, and following the announcement, it briefly dropped to 1.8%.
As a result, mortgage rates dipped to a three-year low, averaging 5.99%. While rates and spreads have edged slightly higher to start this week due to new market data, the announcement clearly demonstrated how mortgage-backed securities purchases can directly support lower mortgage rates. We should expect further policy announcements in the coming weeks as the administration continues laying the groundwork for additional affordability-focused measures.
This week also brings a heavy slate of potentially market-moving economic data, making it especially important to watch bond market reactions, particularly the 10-year Treasury yield. When bond yields decline, mortgage rates typically follow.
Key reports to watch this week include:
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Tuesday: Consumer Price Index (CPI) inflation report
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Wednesday: Producer Price Index (PPI) inflation data and retail sales
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Thursday: Weekly jobless claims and manufacturing data
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Friday: Industrial production and capacity utilization
Volatility is likely as markets digest this information, but if the data continues to show easing inflation and economic moderation, there is a strong chance that bond yields and mortgage rates could continue their gradual improvement. Call me today to lock in your rate!
John Lamberg
MORTGAGE LOAN ORIGINATOR
NMLS 189233
