Privatization may raise mortgage rates for U.S. citizens

The U.S. government is considering a plan that could lead to the privatisation of mortgage giants Fannie Mae and Freddie Mac. These companies are essential for the U.S. housing market, as they support around 70 percent of all home loans. The move could change how they operate and impact the mortgage rates for Americans. President Trump's administration may issue an executive order to remove the government oversight of these agencies. This plan would explore options to release Fannie Mae and Freddie Mac from federal control, a topic that was previously discussed during Trump's first term but did not advance. Both companies buy loans from lenders, package them, and create securities that they guarantee. This process helps keep borrowing costs low for homeowners. However, if privatisation occurs, it may disrupt the mortgage market, potentially increasing the average rate for a 30-year mortgage, which is currently around 7 percent. While some investors support the idea of privatising Fannie and Freddie, critics worry that it could benefit only a few wealthy individuals. These investors have been pushing for privatisation since the companies have been under government control since the 2008 financial crisis. If privatisation weakens the government’s assurance that these firms will not be allowed to fail, it could make their bonds less appealing to investors. This change could raise borrowing costs for Fannie Mae and Freddie Mac, which might then lead to higher mortgage rates for homebuyers—an outcome that could be politically damaging. Investors are closely monitoring these developments, as the implications of privatisation could significantly affect the mortgage market and homeownership costs in the U.S.