A Reminder of the Importance of Supply and Demand in Mortgage Rates

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Orion brokers understand that much of the world’s pricing is driven by supply and demand, whether it is lakefront property, Fabergé eggs, or mortgage interest rates. Supply and demand in economics refers to the relationship between the quantity of a product or service that producers are willing to sell at various prices and the quantity that consumers are willing to buy.

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In financial markets, including housing finance, the price of a commodity or mortgage rate is determined by the interaction of supply and demand. The resulting price is known as the equilibrium price, where the quantity supplied equals the quantity demanded. This principle is foundational to understanding movements in mortgage rates and broader lending markets.

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Recent Policy Announcements and Their Impact on Interest Rates

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This matters because brokers are closely watching two recent announcements from President Donald Trump that could influence interest rates. While specific details were limited, the President announced that Freddie Mac and Fannie Mae would purchase approximately $200 billion of mortgages in the form of mortgage backed securities, rather than acting solely in their traditional secondary market role.

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It is expected that these securities would be issued by Fannie Mae and Freddie Mac themselves. Following the announcement, bond prices increased and mortgage rates declined, reflecting higher demand for mortgage backed securities, all else being equal. This reaction reinforces how increased demand can directly impact interest rate movement.

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Credit Card Rate Cap Proposal and Market Reactions

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Late last week, President Trump also proposed a cap on credit card interest rates at 10 percent. This proposal echoes a similar bill introduced in February 2025 by Senator Bernie Sanders of Vermont, which did not advance.

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In response, the Bank Policy Institute, American Bankers Association, Consumer Bankers Association, Financial Services Forum, and Independent Community Bankers of America issued a joint statement warning that such a cap could significantly reduce credit availability. The organizations noted that while the goal of affordable credit is shared, a 10 percent cap could harm millions of American families and small business owners who rely on credit cards.

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They further stated that such a policy could push consumers toward less regulated and more costly alternatives, ultimately working against its intended purpose.

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Industry and Market Perspectives on Credit Availability

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Billionaire hedge fund manager Bill Ackman also weighed in, calling the proposal a mistake. He noted that without the ability to price risk appropriately, lenders would likely cancel cards for millions of consumers, forcing them into higher cost and less favorable borrowing options.

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This perspective mirrors what Orion brokers regularly communicate to clients. One of the most effective ways to avoid high interest rates is responsible borrowing, living within one’s means, and paying balances in full each month. Interest rates on credit cards reflect default risk, and lower caps would likely lead to tighter underwriting standards, fewer approvals, and reduced rewards and benefits.

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Others argue that borrowers must earn access to lower rates through credit behavior, rather than receiving them through regulation. Simply put, pricing reflects risk, and risk cannot be eliminated by policy alone.

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Why Supply and Demand Still Matter to Brokers

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Brokers know that no single individual, whether the President of the United States or the Chair of the Federal Reserve, directly sets mortgage rates or credit card interest rates. These rates are ultimately determined by market forces, investor demand, risk assessment, and supply and demand dynamics.

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While policy proposals can influence sentiment and short term movement, the fundamentals remain unchanged. For Orion and our broker partners, these developments serve as an important reminder that supply and demand continue to shape pricing across financial markets and remain central to how interest rates are formed every day.

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