Interest Rate Forecast 2026: Trump’s $200 B Mortgage Bond Purchase and What It Means for Investors

President Donald Trump’s directive to buy $200 billion in mortgage bonds aims to drive down mortgage rates and spur the housing market – a move with significant implications for real estate investors.

Trump’s $200 B Mortgage Bond Order – What Happened?

In a surprise policy move, President Donald Trump announced that he is instructing his representatives to purchase $200 billion in mortgage-backed securities (MBS). The goal of this unprecedented action is clear: “This will drive Mortgage Rates DOWN, monthly payments DOWN, and make the cost of owning a home more affordable,” Trump posted on social media. Essentially, Trump is leveraging Fannie Mae and Freddie Mac – the government-controlled mortgage finance giants – to inject massive liquidity into the housing finance system. Bill Pulte, the Federal Housing Finance Agency Director, confirmed that Fannie Mae and Freddie Mac will execute the $200 billion bond-buying plan.

Trump’s reasoning stems from a decision in his first term not to privatize Fannie and Freddie, leaving them with substantial retained earnings. He noted that because he did not sell those agencies, they amassed “$200 billion in cash… an absolute fortune” which can now be deployed. By having these agencies buy up mortgage bonds (which are essentially bundles of home loans), demand for those bonds should rise – pushing bond prices up and mortgage interest rates down. This strategy echoes the Federal Reserve’s past quantitative easing programs, albeit on a smaller scale. For context, during the pandemic the Fed bought trillions in MBS to stabilize markets; in comparison, Trump’s $200 billion plan is sizable but still “fairly small” in likely impact on rates.

Immediate Market Reaction: Rates Dip and Stocks Surge

Trump’s announcement had an immediate psychological impact on financial markets. Mortgage interest rates, which have been hovering in the low 6% range for 30-year fixed loans, saw a slight dip on the news and in the days following. In fact, current 30-year mortgage rates are around 6.1%, down from roughly 7% in early 2025. Analysts estimate that the $200 billion MBS purchase could further “bring borrowing costs down by 10 to 15 basis points” (0.10–0.15 percentage points). While that’s a modest reduction, every bit counts in a market where affordability is stretched. Freddie Mac’s weekly survey reported “mortgage rates remained within a narrow range, hovering close to the 6% mark” as 2026 began, and purchase loan applications are up over 20% year-on-year thanks to the easing of rates. This indicates that even slightly lower rates are already stimulating buyer demand.

Investors in the stock market also cheered Trump’s housing-focused intervention. Housing-related stocks surged after the announcement. Mortgage lenders like loanDepot and Rocket Mortgage saw their share prices jump double-digits, and major homebuilder stocks climbed 6–7% on optimism that lower financing costs will boost home purchases. Even real estate investment trusts (REITs) and credit scoring companies got a bump. This rally reflects Wall Street’s view that even a small decline in mortgage rates may help revive the sluggish housing market, increasing loan volumes and transaction activity. Analysts at TD Cowen noted the move “could help narrow the spread between the 30-year mortgage and the 10-year Treasury yield,” which has been unusually wide. A narrower spread means mortgage lenders could lower rates for borrowers without hurting their margins. In short, the market’s initial reaction was optimistic, pricing in a short-term boost to housing from Trump’s plan.

Housing Affordability and the Broader Impact

The motivation behind Trump’s $200 billion MBS purchase is tackling housing affordability, a politically charged issue in his second term. Over the past year, high mortgage rates (peaking around 7%) combined with elevated home prices have sidelined many buyers, leading to a prolonged housing slowdown. By driving mortgage rates down into (or below) the 6% range, policymakers hope to relieve some pressure on monthly payments and entice buyers back into the market. Trump himself stated he is giving “special attention to the housing market” to make homeownership more attainable.

In the near term, lower rates will improve buyers’ purchasing power – for the same house price, a lower interest rate means a cheaper monthly payment. Real estate economists note that mortgage rates likely need to fall to the mid-5% range (5.5–5.9%) to substantially boost affordability and bring a significant wave of buyers off the sidelines. Some are hopeful this policy (and perhaps further rate declines) can achieve that. In fact, the National Association of Realtors forecasts lower mortgage rates in 2026 will help home sales rebound by double digits, after two years stuck near a 4 million annual sales pace. With slightly more inventory finally coming onto the market and prices leveling off, any improvement in interest rates could be the catalyst for pent-up buyer demand to release.

However, experts also caution that cheaper mortgages alone won’t fix everything. One risk is that lower rates could stoke more buyer competition, potentially nudging home prices up and offsetting the benefit of lower financing costs. As one strategist remarked, “Every little bit will help push mortgage yields lower… but it might be self-defeating in terms of housing affordability. It might get a few people off the fence… but it will also increase demand for housing.”This points to the real elephant in the room: housing supply. There is broad agreement that the U.S. housing market still faces a supply shortage after a decade of under-building. Trump has floated measures to address supply (such as barring large Wall Street investors from buying single-family homes to keep inventory for individual buyers), but zoning and local regulations are longer-term obstacles. For now, investors and homebuyers alike should temper expectations: Trump’s MBS purchase is a helpful nudge, not a total game-changer. It provides a short-term tailwind for housing activity, but broader affordability improvements will also depend on supply-side solutions and the overall economic climate.

Effect on Non-QM and Stated Income Lending

Trump’s directive primarily targets agency mortgages (the traditional “full-doc” loans backed by Fannie Mae/Freddie Mac), which means the immediate rate reductions will be most pronounced in the conventional mortgage market. Non-QM (Non-Qualified Mortgage) loans – which include stated-income mortgages, bank statement loans, DSCR investor loans, and other alternatives outside standard guidelines – could also feel a secondary effect, though not as directly. Initially, we expect a direct drop in rates for conventional loans, which has already begun. This “may trickle to Non-QM/Stated Income mortgage products” over time, as LBC Capital Income Fund, LLC’s team observes. Here’s why: Non-QM lenders operate in a more free market pricing environment, but if overall market interest rates fall, competitive pressures and investor yield expectations typically nudge non-QM rates lower as well.

That said, Non-QM borrowers often react a bit differently to rate changes. Many such borrowers (self-employed individuals, real estate investors, etc.) are primarily concerned with access to credit and flexible underwriting, sometimes more than a quarter-point difference in rate. A CoreLogic economist noted that non-QM clients “prioritize the ability to secure financing over slight fluctuations in rates”. In other words, someone using a bank-statement loan cares that they can get the loan at all – they’re often less rate-sensitive than a typical prime borrower. Small rate drops might not change a non-QM borrower’s decision to take a loan, especially for a primary home. However, for investor borrowers in the non-QM space (like flippers or rental property investors), interest costs directly affect project profits. If rates dip, more investment property deals become financially feasible; if rates spike too high, some investors will shelve projects due to diminished returns. Fortunately, the current trend is downward: “Most prognosticators expect interest rates to decrease slightly in 2025 [and into 2026]… And that should be a good thing for the non-QM market.” Lower conventional rates can encourage non-QM lending growth, as overall mortgage activity picks up and lenders expand product offerings. In fact, 2025 already saw lenders increasing their acceptance of non-QM and alternative products to fill the void left by a shrinking refi market, and this is likely to continue.

LBC Capital Income Fund, LLC’s Perspective: As a private lender specializing in stated-income and non-QM loans, LBC Capital Income Fund, LLC is closely monitoring how these market technicals play out. While agency MBS purchases won’t directly fund non-QM loans, a healthier overall mortgage market benefits everyone. We anticipate borrowing costs for our niche borrowers could improve marginally, even as we maintain the flexible underwriting that our clients rely on. More importantly, demand for alternative loans may grow – for example, an investor who was on the fence about a new property might move forward now that rates are a bit lower, or a self-employed borrower might seize the moment to refinance an expensive hard-money loan into a reasonably priced stated-income loan. In short, Trump’s rate-reducing strategy “will have a direct drop in full-doc loan products and may trickle to Non-QM” in the coming weeks, and LBC Capital Income Fund, LLC is prepared to adjust and capitalize on these shifts for our clients.

U.S. Interest Rate Forecast for 2026

What does all this mean for the trajectory of interest rates in 2026? Mortgage rate forecasts for 2026 are cautiously optimistic, but nuanced. Trump’s $200 billion bond-buying order signals the administration’s determination to push rates down sooner rather than later. Many housing economists indeed expect gradually declining mortgage rates through 2026 as inflation pressures ease and the Federal Reserve potentially pivots to rate cuts. The National Association of Realtors projects that “2026 will be better with lower mortgage rates,” improving affordability and boosting home sales. This aligns with the idea that rates could fall into the mid-5% range if economic conditions cooperate – a level that could meaningfully re-energize the housing market.

However, investors should note that not all forecasts predict a steep drop in long-term rates. The Congressional Budget Office, for example, released projections indicating the Federal Reserve might hold its key rate around 3.4% by 2028 after cutting in 2026, and that 10-year Treasury yields could even inch up from 4.1% in late 2025 to 4.3% by late 2028. Since the 10-year Treasury is a benchmark for mortgage rates, this implies mortgage rates may not free-fall, but rather settle at a moderate level. In practical terms, we may see 30-year mortgage rates in 2026 hover in the 5.5% to 6% range, assuming no major economic downturn. Trump’s intervention might help accelerate reaching the lower end of that range sooner. It’s worth remembering that at the start of 2026, rates are already about 0.7 percentage points lower than a year ago (6.16% vs 6.93%). This downward trend could continue, but likely in a gradual, measured way.

For planning purposes, real estate investors and borrowers should expect interest rates in 2026 to be lower than 2025’s peak, but perhaps not dramatically so. Strategic policy moves (like the MBS purchase) and potential Fed easing create a tailwind for lower rates. Yet, factors such as federal debt levels, inflation expectations, and global economic forces will put a floor under how low long-term rates can go. Most experts aren’t predicting a return to the 3% mortgage anytime soon. Instead, look for a middle ground – rates stable or drifting slightly down, enough to improve affordability bit by bit.

Implications for Real Estate Investors and LBC Capital Income Fund, LLC’s Strategy

From an investor’s standpoint, Trump’s mortgage-bond buying blitz and the ensuing interest rate outlook carry several key implications:

• Cheaper Financing for Deals: Real estate investors who rely on financing will enjoy lower borrowing costs. For those acquiring rental properties or flipping homes, a drop of even half a percent in the loan rate can noticeably boost cash flows or profit margins. As rates approach the mid-5% range, more deals “pencil out” profitably, which could spur investors to expand portfolios or refinance existing high-rate loans for better terms. LBC Capital Income Fund, LLC expects increased investor activity as financing becomes a bit more affordable.
• Property Value Support: Lower interest rates generally increase purchasing power, which tends to prop up home values. That’s good news for investors holding property – the housing assets underlying your investments may appreciate or at least hold value better when buyers can pay more. It also means loan-to-value (LTV) ratios on existing mortgages could improve, strengthening the equity cushion for lenders and investors alike. For LBC Capital Income Fund, LLC’s mortgage fund investors, a healthier housing market means the loans in our portfolio are better collateralized and potentially less risky.
• Refinance and Exit Opportunities: If rates continue to dip in 2026, many borrowers (both homeowners and investors) will look to refinance. This can create a surge in payoff activity for private lenders like LBC Capital Income Fund, LLC – loans originated at higher rates might be paid off early as borrowers refinance into cheaper conventional loans. While that means turnover, it’s not necessarily negative: LBC can redeploy capital into new loans at current rates or terms. It also highlights the importance of continually originating quality loans. On the flip side, investors using bridge loans or hard money loans could refinance into LBC’s longer-term stated-income loans at attractive rates, presenting a business growth opportunity.
• Yield Considerations for Private Investors: A lower interest rate environment in general can push income-oriented investors to seek higher yields elsewhere. If bank deposits and Treasuries yield less, the consistent 8%± returns from private mortgage funds become even more attractive by comparison. LBC Capital Income Fund, LLC’s Income Fund, for instance, offers a fixed return to investors backed by real estate loans. In a 5% mortgage world, earning around 8% secured by property could be seen as a strong risk-adjusted return. Thus, investors with LBC Capital Income Fund, LLC stand to benefit from a favorable spread between what our borrowers pay and what conventional markets offer – and that spread can attract more capital looking for reliable yields.
• Non-QM Market Resilience: Lastly, non-QM lending could gain more mainstream acceptance as the mortgage industry adapts. When volumes were down in 2024–2025, many lenders turned to non-QM products to fill the gap. With 2026 poised for a moderate rebound, we expect non-QM loans (like those LBC specializes in) to remain a crucial piece of the puzzle, serving self-employed borrowers and investors that banks can’t easily underwrite. LBC Capital Income Fund, LLC is well-positioned as an expert in this space, and our investors indirectly benefit from this diversification. While big banks and agencies deal with rate volatility and refinancing waves, our focus on niche lending allows for more stable portfolio management.

Bottom Line: President Trump’s bold move to buy $200 billion in mortgage bonds has injected optimism into the 2026 interest rate forecast. For real estate investors, lower rates can open new opportunities – from acquiring properties with cheaper loans to refinancing into better terms. For investors in mortgage funds like LBC Capital Income Fund, LLC, the environment of easing rates and recovering housing activity is generally positive: it bolsters asset values and keeps our pipeline of borrowers robust, all while our disciplined underwriting protects yields. We remain vigilant – monitoring how quickly these rate reductions materialize and how the Federal Reserve responds – but confident that a well-managed real estate investment strategy can thrive in this climate.

Conclusion

Trump’s mortgage-bond buying order is “HUGE HUGE market news” indeed, marking an unusual intervention aimed at helping homebuyers and shaking up the mortgage market. It has already nudged interest rates down and signaled to the market that housing affordability is a national priority. For investors, the ripple effects of slightly lower interest rates in 2026 are largely encouraging: more demand, more liquidity, and potentially more investment opportunities. However, it’s important to keep expectations grounded. A $200 billion purchase, while impactful, won’t by itself slash mortgage rates overnight or solve structural issues like housing supply. We anticipate a gradual improvement – mortgage rates edging lower into the mid-5% to 6% range and housing activity picking up accordingly.

LBC Capital Income Fund, LLC will continue to provide updates and expert analysis as the situation evolves. Our team is closely watching how the MBS purchases proceed and whether additional housing policies (like the proposed ban on institutional homebuying) come to fruition. In the meantime, we’re here to help our investors and borrowers navigate the changing landscape. Interest rate forecasts for 2026 are looking brighter than last year, and with prudent strategy, investors can capitalize on these trends. Whether you’re a real estate investor seeking flexible financing or an accredited investor looking to earn solid returns through private lending, understanding these market dynamics is crucial. LBC Capital Income Fund, LLC’s view is optimistic: with rates softening and demand returning, 2026 could be a year of renewed growth in the housing and mortgage sectors. And as always, we’re committed to ensuring our investors benefit from these developments – through careful risk management, agile lending programs, and an unwavering focus on opportunities that arise from market shifts.