Fannie & Freddie Exit Could Make Mortgages Costlier
Homebuyers should take note, Fannie Mae and Freddie Mac, which have been under government conservatorship for 17 years, may be headed toward privatization. This shift could usher in higher mortgage rates, squeezing borrowers, especially first-time and lower-income buyers.
The proposed move, supported by the Trump administration, aims to free these institutions from federal control, potentially reducing taxpayer exposure and encouraging market competition. However, analysts warn that without clear government backing, investors may demand higher returns—raising borrowing costs. Some estimate a possible 1 percentage point increase in mortgage rates during the initial phase.
Investment firm Pimco cautions that the plan may benefit shareholders but disadvantage everyday borrowers by reducing market liquidity and stability. Hedge fund investors like Bill Ackman and John Paulson stand to gain, prompting concerns that the changes might favor financial elites over ordinary homeowners.
Meanwhile, officials like Treasury Secretary Scott Bessent have emphasized that any privatization effort will hinge critically on its impact on mortgage rates—plans that increase spreads may be dropped