Rising Home Loan Rates Reflect Ongoing Housing Market Challenges Amid Washington Policies

Hadisur Rahman, JadeTimes Staff

H. Rahman is a Jadetimes news reporter covering Business

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Image Source: Andrea Riguier

Home loan rates have continued to climb, reflecting the ongoing challenges facing the housing market as Washington's fiscal policies exert pressure on borrowing costs. According to Freddie Mac, the average rate for 30-year fixed-rate mortgages rose to 6.86% for the week ending May 22, up from 6.81% the previous week. These figures do not account for fees or points, and actual rates may vary across different regions.

Since the beginning of the year, the rate for the most popular mortgage product has remained relatively stable, fluctuating around the upper-6% range. While this stability has not significantly impacted the housing market, there are concerns that the rate environment may worsen in the near future.

Bond investors are increasingly wary of fiscal policy proposals from the Trump administration and the Republican-led Congress. A notable sell-off in bonds during April raised alarms, prompting discussions about the potential reversal of some of the White House's stringent tariff proposals. However, the tax legislation that passed the House of Representatives on May 21 has reignited concerns among investors.

When bond investors sell off their holdings, yields rise, leading to increased borrowing costs. The 30-year fixed-rate mortgage is closely tied to the 10-year U.S. Treasury note, which has seen significant fluctuations amid ongoing fiscal debates in Washington.

The complexities of home loan rates extend beyond fixed income investments; they also reflect the dynamics of the housing market and the housing finance system, which may soon face additional uncertainties. On May 21, President Donald Trump indicated on social media that he was "giving very serious consideration to bringing Fannie Mae and Freddie Mac public." These two government-sponsored enterprises (GSEs) have been under government conservatorship since the 2008 financial crisis.

Fannie Mae and Freddie Mac play a crucial role in the housing market by purchasing mortgages from banks and other lenders, allowing them to offload risk and extend credit to more borrowers. This mechanism helps maintain liquidity and affordability in the housing market.

Originally private companies, Fannie and Freddie lowered their underwriting standards during the subprime bubble of the early 2000s. When the bubble burst in 2008, they were placed under government control, a situation that was intended to be temporary. However, nearly two decades later, the complexities of unwinding these significant institutions have posed challenges for three presidential administrations, including Trump's first term.

While many housing experts welcome discussions about ending the conservatorship, there are significant concerns regarding the process. Laurie Goodman, a fellow at the Housing Finance Policy Center at the Urban Institute, noted in an April 2025 analysis that Fannie and Freddie guarantee over 40% of one-to-four-family mortgage originations and nearly half of the multifamily mortgage market. She cautioned that without a well-defined vision for exiting conservatorship, the process could lead to turmoil in financial markets and the U.S. housing market.

Michael Bright, CEO of the Structured Finance Association, emphasized the need for thoughtful proposals that consider the impact on the bond market. "We welcome the discussion," he stated, "but we would just like to see any proposals be thoughtful and carried out with the impact of the bond market in mind."

As the housing market navigates these turbulent waters, the implications of rising home loan rates and potential changes to Fannie Mae and Freddie Mac's status remain critical issues for borrowers and investors alike.