Three levers could cut US mortgage rates by up to 90 points, PIMCO argues

What PIMCO proposes

The average 30-year mortgage rate rose to 7.5% in October 2026, according to PIMCO. Against that level, PIMCO argues that three policy options could collectively lower mortgage rates by 65 to 90 basis points. m:…8169

The first option is additional mortgage-bond purchases by Fannie Mae and Freddie Mac, which PIMCO estimates could lower mortgage rates by 20 to 30 basis points. PIMCO notes that the two housing finance firms have been slow to implement a directive to buy an additional 200 billion dollars of mortgage bonds. m:…8169

The second option is cutting fees for new borrowers only, which PIMCO estimates could lower mortgage rates by approximately 25 to 30 basis points. Limiting the cut to new borrowers is the key design choice, and it is what separates this option from a broader fee cut. m:…8169

The third option is the Federal Reserve stopping the roll-off of its mortgage bond portfolio, which PIMCO estimates could lower mortgage rates by about 20 to 30 basis points. Added together, the three estimates produce the 65 to 90 basis point range, though each estimate is PIMCO's, not a measured outcome. m:…8169

Why the design matters

PIMCO warns that broad application of cost-reduction measures to existing mortgages could increase mortgage rates by raising refinancing risk. That warning is the reason the fee proposal is limited to new borrowers: help for existing borrowers could backfire by making lenders price in more refinancing. m:…8169

The stakes are large for buyers. PIMCO notes that a 1-percentage-point drop in the mortgage rate lowers a buyer's monthly payment by roughly as much as a 10% house-price cut. A 65 to 90 basis point reduction would therefore be close to that scale of relief, if it were achieved. m:…8169

Fannie Mae and Freddie Mac held about 310 billion dollars of mortgages as of August 2026, according to PIMCO. Single-family mortgage borrowers pay a premium nearly 70 basis points higher than multifamily borrowers, according to PIMCO, which shows how much pricing already varies by borrower type before any policy change. m:…8169

The politics are slow. Treasury Secretary Scott Bessent indicated the United States may not remove the housing finance firms from conservatorship until 2027 or 2028, according to PIMCO, and President Trump signed an executive order directing the Federal Housing Finance Agency to cancel mortgage insurance premiums under certain conditions. The options PIMCO describes are available now, but the institutional timetable is not. m:…8169

Housing demand is already cooling elsewhere

In the United Kingdom, the Bank of England's agents report that higher mortgage rates are weighing further on housing demand, and that consumer durables, construction, housing and commercial property remain weak. Consumer demand remains fragile and price sensitive, according to the same report. m:…6359

Hong Kong's September mortgage survey shows a similar cooling. The number of mortgage applications in September 2026 decreased month on month by 10.5% to 7,560, and mortgage loans approved decreased by 1.1% compared with August to 31.8 billion Hong Kong dollars. m:…3808

Mortgage loans drawn down during September 2026 decreased by 22.8% compared with August to 25.3 billion Hong Kong dollars, according to the survey. Loans financing primary market transactions decreased by 6.8% to 8.5 billion Hong Kong dollars, and loans for secondary market transactions decreased by 5.7% to 14.4 billion Hong Kong dollars. m:…3808

One segment moved the other way: mortgage loans for refinancing increased by 14.6% to 8.9 billion Hong Kong dollars. That pattern fits a market where buyers step back but existing borrowers still seek better terms. m:…3808

What would show the policy is working

Hong Kong's survey also shows the limits of reading one month as a crisis. The mortgage delinquency ratio stood at 0.11% in September 2026, and the outstanding value of mortgage loans increased month on month by 0.2% to 1,980.3 billion Hong Kong dollars. m:…3808

The estimated number of residential mortgage loans in negative equity was 3,819 cases at the end of September 2026, down from 4,356 cases at the end of June, with an aggregate value of 17.3 billion Hong Kong dollars, down from 19.6 billion. The three-month delinquency ratio for those loans rose to 1.34% from 1.25%, so the stock of troubled loans shrank while its delinquency rate edged up. m:…7315

In the United Kingdom, credit remains widely available, according to the Bank of England's agents, and investment intentions have turned slightly positive but from a low base. The constraint on housing there is price and rates, not access to credit. m:…6359

The test for PIMCO's options is therefore straightforward: if any of the three levers is pulled, mortgage rates should fall toward the estimated ranges, and applications should respond. If rates stay near 7.5% while applications keep falling, the argument that policy options are available now will start to look like an argument that they are available but unused. m:…8169