Pimco Forecasts Decline in Mortgage Rates Amid Fannie Mae and Freddie Mac Purchase Activity

Pimco has projected a downward trend in U.S. mortgage rates, citing increased acquisition activity by Fannie Mae and Freddie Mac in the secondary mortgage market. The firm notes that these government-sponsored enterprises (GSEs) have ramped up their monthly purchases to over $100 billion in December 2025, up from $75 billion in the prior year. This expansion in GSE liquidity support is viewed as a key driver behind the anticipated easing of mortgage rates. The firm’s analysis shows that the 30-year fixed mortgage rate, which averaged 7.2% in late 2024, has already declined to 6.4% as of January 2026, a drop of 80 basis points. Pimco attributes this shift to the GSEs’ willingness to absorb higher-risk loans and stabilize the housing finance system amid tighter credit conditions. The increase in GSE purchases has also led to a narrowing of the spread between agency and non-agency mortgage-backed securities, reducing overall financing costs. The impact extends beyond consumers, with mortgage lenders reporting improved origination volumes and refinancing activity. Major lenders such as Wells Fargo and JPMorgan Chase have seen a 22% increase in mortgage applications year-over-year, driven by the lower rate environment. Additionally, the housing market has shown signs of recovery, with new home sales rising 14% in Q4 2025 compared to the previous quarter. Pimco warns that sustained support from Fannie Mae and Freddie Mac will depend on continued federal oversight and capital adequacy. If the GSEs maintain their current purchase pace through 2026, the firm expects the 30-year fixed rate to stabilize near 6.0% by mid-year.