Mortgage rates don’t move in a vacuum. Behind the scenes, large institutional players influence how affordable home loans become—and right now, two of the biggest players in housing finance are making a noticeable move.
In recent months, Fannie Mae and Freddie Mac have significantly increased their holdings of mortgage-backed securities (MBS), a shift that could help put downward pressure on mortgage rates in the months ahead.
A Major Increase in Mortgage Holdings
Since May, Fannie Mae and Freddie Mac have added more than $55 billion in mortgage principal balances to their combined balance sheets—an increase of over 30% in just a few months. That brings their total retained mortgage holdings to approximately $234 billion, the highest level seen in four years.
Industry analysts expect this trend could continue, with estimates suggesting their combined holdings could grow by another $100 billion in 2026.
While neither Fannie Mae, Freddie Mac, nor their regulator—the Federal Housing Finance Agency (FHFA)—has publicly explained the increase, the move is drawing attention across the housing and lending industries.
How This Could Affect Mortgage Rates
When Fannie Mae and Freddie Mac buy and retain more mortgage-backed securities, it increases demand for mortgages in the secondary market. That demand matters.
Higher demand for MBS typically:
- Pushes prices up
- Drives yields down
- Translates into lower interest rates for borrowers
As economist Joel Berner of Realtor.com explains, when yields fall, lenders can offer mortgages at lower rates while maintaining profitability. In short, the more attractive mortgages are to investors, the easier it becomes for lenders to price loans competitively.
The Shrinking Yield Spread
One key indicator supporting this trend is the yield spread—the difference between mortgage rates and the 10-year U.S. Treasury yield.
- Mortgage rates are usually higher than Treasuries due to added risk.
- Since May, that spread has narrowed by roughly 0.25 percentage points.
- During the same period, average mortgage rates have fallen by about 0.57 percentage points, landing near 6.2%.
That suggests nearly half of the recent decline in mortgage rates may be tied to this compression in the yield spread—an encouraging sign for buyers and refinancers alike.
Why Are Fannie and Freddie Doing This?
There are a few possible explanations:
1. Supporting a Sluggish Housing Market
Housing activity in 2025 has been uneven, with slower sales and modest price growth. Increasing mortgage demand helps stabilize lending activity and improves affordability—both key ingredients for a healthier housing market.
2. Preparing for a Potential Public Offering
Fannie Mae and Freddie Mac have been under federal conservatorship since 2008. Recently, discussions have resurfaced around the possibility of a future public stock offering.
By expanding their retained portfolios, the enterprises can:
- Increase direct interest income
- Improve earnings visibility
- Present a stronger financial profile to potential investors
3. Aiming for Lower Borrowing Costs
Lower mortgage rates remain a central goal of federal housing policy. Expanding MBS holdings can indirectly support that objective without changing lending standards or loan programs.
What This Means for Homebuyers and Homeowners
For consumers, the takeaway is simple: institutional demand for mortgages matters, and right now, that demand is rising.
While no single factor determines mortgage rates, this trend:
- Helps create downward pressure on rates
- Improves pricing stability
- Encourages lenders to stay competitive
That’s good news for:
- Buyers waiting for improved affordability
- Homeowners considering refinancing
- Borrowers navigating rate volatility
The Bottom Line
Fannie Mae and Freddie Mac’s growing mortgage holdings signal a meaningful shift in the secondary mortgage market—one that may help ease borrowing costs over time.
At Jet Direct Mortgage, we keep a close eye on these market dynamics so we can help our clients make informed decisions, whether they’re buying, refinancing, or planning their next move.
If you’re wondering how today’s market trends could affect your mortgage options, our team is here to help guide you every step of the way.
Enid Adinolfi is a NYS licensed mortgage loan officer at Jet Direct Mortgage. She has been assisting home buyers in achieving the American Dream by getting them mortgage ready. She analyzes their credit, their income and their assets and helps them find a mortgage program that is right for them. NMLS#8316