The 2026 US mid-term elections in November are a critical point for Donald Trump’s administration with primaries starting from early March in some states. The result may be that his Republican Party loses its majority in the Congress, meaning he will have a harder time getting his way.
So, he has stepped on the gas to signal to voters that he cares about them and is trying to deliver on his campaign promises, including lavishning attention on the housing market and affordability.
This month already he has attempted to stop institutional investors buying up housing stock, tried to cap credit card rates and attempted to boost competition among consumer lenders.
Further, on January 8, in a Truth Social post he wrote that Fannie Mae and Freddie Mac are sitting on a pile of cash and he instructed his "representatives", without saying whether that would be Fannie, Freddie or the US Treasury, to buy $200bn in mortgage bonds. He believes this will lower mortgage rates.
All eyes should be on his appearance next week at Davos, where he plans to discuss further housing and affordability proposals.
But will the eye-catching policies deliver?
Let’s start with government-sponsored enterprises (GSEs) and the $200bn worth of mortgage bonds. Fannie Mae and Freddie Mac do not have $200bn lying around in cash, the math is a little more complicated than that.
They can tap into their existing cash, restricted cash and sell securities they own. Some strategists have indicated they may even sell debt. But for that debt to make sense it has to be sold at an extremely cheap rate, which they believe seems unlikely.
While the hoped for outcome of his announcement is lower mortgage rates, Deutsche Bank has said that could backfire by boosting demand for housing when there isn't the supply to meet it. That would push up house prices further.
The bank noted that US housing stock has been constrained dating back to the 2008 financial crisis. “On this issue, no housing strategy will yield much until the very end of Trump’s term, at best,” it said.
Since Trump made the announcement, mortgage bond strategists have noted that yields may have tightened by 10bp-15bp but they do not anticipate much further tightening. Morgan Stanley has changed its mortgage-backed securities position from overweight to neutral, discouraging people from buying more of the asset class.
Indeed, spreads on mortgages already tightened towards the end of 2025. Analysts from multiple bank noted that GSEs started growing their portfolio last year, adding nearly $5bn per month from July through September to nearly $16bn a month in October and November.
“While that pace may not be sustainable, the surprise to the market should have been closer to $100bn versus existing demand expectations, rather than a $200bn shock,” said Morgan Stanley.
Deutsche Bank said that GSEs hold nearly $250bn of bonds and adding $200bn will put them at the brink of their statutory limit of $450bn. Even if the limit were raised and the GSEs bought the bonds Trump wants them to, it is still is not clear whether that would filter through to lower mortgage rates or whether money managers would simply book bigger profits from having sold the bonds.
The there is the ban on institutional investors buying new single-family homes. It is eye-catching to see the White House stand up for US families but in reality, analysts indicate that less than 1% of single-family homes are owned by institutional buyers. It would appear not to be a systemic problem.
Credit cards are another area of focus. According to Federal Reserve Board data from 2024, there are around 600m of credit card accounts are in the US, but 97% of them are held by those earning above $100k a year, not lower income groups.
The average rate charged to consumers is 26%. Trump has said he wants credit card rates to be capped at 10%. That’s a big difference but it could cripple the markets that allow for extension of credit to consumers in the first place. Kill that off and you kill demand in the economy.
Whether one likes it or not that interest cost includes the money that needs to be paid to institutional investors who buy securitized credit card receivables. Capping credit card interest at 10% means less headroom for securitization to work and less ability for them to absorb a rise in defaults.
Investors buying these securities would then ask for more risk premium, making the economics even worse.
It could lead to card issuers not offering products to borrowers with lower credit scores.
According to a Deutsche Bank report on Monday, credit cards made up 7% of US ABS issuance last year, at $22.2bn. A Wells Fargo note said, triple-A ratings "could absolutely be in question if portfolio yield, and in turn, excess spread, become very challenged."
But that's not all from Trump. On Tuesday he wrote on his social media urging for support for the Credit Card Competition Act. It proposes that banks issuing Visa or Mastercard offer merchants an alternative network to reduce their power. While it is a positive for issuers like American Express and Capital One, which would jump on the opportunity, some argue that it might expose consumers to unsafe security networks and potentially reduce rewards.
Such populist measures are designed to keep Trump and the Republicans' concentration of political power. But what may work at the ballot box could malfunction when it comes to the real economy.