What Fannie Mae and Freddie Mac’s privatization could mean for buyers

If you plan to buy a home, you’ve probably heard about Fannie Mae and Freddie Mac. These two major lending players help keep mortgages affordable for millions of Americans. Now, there’s talk of these companies moving out of government control and into the private sector, and while that might sound like a lot of financial jargon, it could impact homebuyers in some crucial ways. Let’s break it down!

What’s changing with Fannie Mae and Freddie Mac?
Since 2008, Fannie Mae and Freddie Mac have been under a government conservatorship, which essentially means they’ve had financial backing from the U.S. Treasury to help stabilize the housing market. These two companies buy home loans from lenders, package them as mortgage-backed securities, and sell them to investors. This process ensures that lenders have enough capital to keep offering mortgages — including the 30-year fixed-rate loans so many homebuyers rely on.

Now, there’s renewed talk of privatizing these mortgage giants. If that happens, the government could reduce its support, making mortgage-backed investments riskier. This shift could mean higher interest rates for borrowers (CNBC, Feb. 12, 2025).

How could this affect mortgage rates?
The biggest question for homebuyers is: What does this mean for mortgage rates? According to Mark Zandi, chief economist at Moody’s Analytics, privatization could lead to higher mortgage rates. However, how much higher rates may go depends on how the transition is handled (CNBC, 2025). For potential buyers, this could be a challenge. Higher rates mean higher monthly payments, which could affect how much home you can afford.

While some buyers are turning to all-cash purchases, most still finance their homes. In 2024, about 74% of U.S. homebuyers used mortgages to purchase their homes, according to the National Association of Realtors. That means even a slight increase in rates could have a real impact on your budget.

What can homebuyers do to prepare?
The good news? There are steps you can take now to protect yourself from potential changes.

• Lock in a rate sooner rather than later: If you’re considering buying, moving up your timeline might make sense. Mortgage rates are still historically low compared to past decades.
• Get pre-qualified for financing: Knowing what you can afford gives you a clear advantage in this shifting market.
• Work with a trusted loan advisor: PRMI’s loan advisors can guide you through these changes, answer your questions, and help you create a plan that makes sense for your financial goals.

We’re here to help
The housing market can feel unpredictable, especially with the possibility of changes to Fannie Mae and Freddie Mac. But you don’t have to navigate it alone. A qualified PRMI loan advisor will be able to keep you informed, answer your questions, and help you feel confident about your home financing journey. You’re never alone!