In the opening days of his second term, President Donald Trump has wasted no time in targeting what he sees as the scourges of high borrowing costs afflicting American households. His proposals—a temporary cap on credit card interest rates at 10% and a directive for government-sponsored enterprises to purchase $200 billion in mortgage-backed securities—aim to deliver quick relief on affordability. But economists like Mark Zandi, chief economist at Moody’s Analytics, warn that these moves could backfire, potentially harming the very consumers they intend to help.

Trump’s credit card cap, announced via a Truth Social post, calls for a one-year limit on rates, framing it as a direct assault on what he calls exploitative practices by lenders. The idea revives a campaign pledge, positioning the president as a champion against “rip-off” interest charges that burden families amid persistent inflation. Meanwhile, the mortgage initiative instructs Fannie Mae and Freddie Mac to buy up securities to lower home loan rates, with the goal of making homeownership more accessible in a market where rates have hovered stubbornly high.

These policies emerge against a backdrop of economic unease, with many Americans still grappling with elevated costs for essentials. Trump’s team argues that capping credit card rates could save consumers billions, while the MBS purchases might shave points off mortgage rates, stimulating the housing sector. Yet, as Zandi explained in a recent interview, the interventions risk unintended consequences that could ripple through financial markets and consumer behavior.

Economists Sound Alarms on Rate Caps

Zandi, speaking to Business Insider, described the credit card cap as particularly problematic. He argues that imposing a 10% ceiling would make lending to riskier borrowers unprofitable for banks, leading them to tighten credit standards or exit segments of the market altogether. “It would hurt the people it’s designed to help,” Zandi said, pointing to potential reductions in credit availability for lower-income households who rely on cards for everyday expenses.

This view aligns with industry pushback. Banking groups have echoed similar concerns, warning that the cap could disrupt the consumer lending ecosystem. For instance, a report from Reuters highlights how such a policy might pressure bank profits and reshape lending economics, potentially limiting access for those with subprime credit scores. Insiders from major banks, as noted in CNBC coverage, label the risks “devastating,” emphasizing that unprofitable operations could lead to widespread credit denials.

Historical precedents offer cautionary tales. During the 1970s, usury laws capping interest rates in some states led to credit shortages, forcing consumers to turn to costlier alternatives like payday loans. Zandi draws parallels, suggesting Trump’s plan could inadvertently boost demand for unregulated lending options, exacerbating financial vulnerability rather than alleviating it.

Mortgage Maneuvers and Market Reactions

Shifting to the housing front, Trump’s order for $200 billion in MBS purchases by Fannie and Freddie aims to inject liquidity into the mortgage market, theoretically driving down rates. Early market responses have been mixed: housing-linked stocks surged immediately after the announcement, as reported by Reuters, with investors betting on a boost to home sales. Posts on X from financial analysts, such as those tracking real-time sentiment, indicate optimism among some traders, with mentions of rates potentially dipping near 6% in the short term.

However, Zandi critiques this approach as shortsighted. He told Business Insider that while the purchases might temporarily lower mortgage rates by 10 to 25 basis points, they could inflate home prices by increasing demand without addressing supply constraints. “You’re essentially subsidizing demand in a market that’s already supply-constrained,” Zandi explained, predicting a scenario where bidding wars intensify, pricing out first-time buyers.

This concern is amplified by broader economic data. With inventory levels at historic lows—partly due to homeowners locked into low rates from the pandemic era—the influx of cheaper financing could exacerbate affordability issues. CNN Business coverage of Trump’s initial rate cap announcement notes the president’s focus on public frustration with high costs, but experts like Zandi argue that without complementary measures, such as incentives for new construction, the plan risks creating a bubble-like environment.

Banking Sector Braces for Impact

The banking industry has been vocal in its opposition, particularly to the credit card cap. Shares of major lenders dipped following Trump’s Truth Social post, as detailed in BBC News, reflecting investor fears over compressed margins. Advocacy groups, including the American Bankers Association, have lobbied against the measure, citing data that projects millions of households losing credit access. PBS News reported immediate pushback, with banks highlighting how the cap could save consumers money in the short run but at the cost of long-term financial stability.

Zandi elaborates on these dynamics, noting that credit card operations rely on risk-based pricing to remain viable. In his Business Insider interview, he pointed out that average rates currently exceed 20% for many cards, a level that compensates for defaults and operational costs. A sudden drop to 10% would force banks to recalibrate, possibly by raising fees elsewhere or curtailing rewards programs that benefit responsible users.

Moreover, the interplay between the two proposals adds complexity. If mortgage rates fall due to MBS buys, consumers might shift debt from high-interest cards to home equity lines, but Zandi warns this could over-leverage households if property values don’t hold. Recent X posts from housing experts, capturing market buzz, suggest a flurry of refinancing activity, yet they also underscore volatility, with some users questioning the sustainability of artificially suppressed rates.

Policy Pathways and Political Calculus

Implementing these ideas faces hurdles. The credit card cap lacks a clear enforcement mechanism, as Trump lacks direct authority over private lenders without congressional approval. CNBC’s analysis describes the path as “unclear,” with bank insiders predicting legal challenges or regulatory workarounds. Similarly, the MBS directive leverages executive power over Fannie and Freddie, but it could strain their balance sheets, inviting scrutiny from fiscal watchdogs.

Zandi, drawing from his experience advising policymakers, suggests alternatives like targeted subsidies for low-income borrowers or reforms to bankruptcy laws. He referenced in Business Insider how past interventions, such as the Credit CARD Act of 2009, achieved protections without blanket caps, fostering a more balanced lending environment.

Politically, Trump’s moves tap into widespread discontent. Al Jazeera’s coverage notes bipartisan support for capping borrowing costs, with some Democrats praising the intent while criticizing the execution. Yet, as midterm elections loom in 2026, the proposals could polarize, with Republicans in banking-heavy districts wary of alienating industry donors.

Broader Economic Ripples

Beyond immediate effects, these policies could influence inflation and Federal Reserve actions. If credit tightens due to the cap, consumer spending might cool, aiding the Fed’s fight against price pressures. However, Zandi cautions in his Business Insider remarks that distorting markets often leads to inefficiencies, potentially slowing economic growth.

Housing markets, already sensitive to rate changes, might see regional disparities. In high-cost areas like California, lower mortgage rates could spur demand, but without supply increases, affordability remains elusive. X sentiment from real estate professionals reflects this divide, with some celebrating potential sales booms while others warn of overvaluation risks.

International observers are watching closely. The BBC News article on bank share declines highlights global investor concerns, as U.S. policies could affect cross-border lending and capital flows. Zandi posits that if the cap reduces credit availability, it might dampen consumption, indirectly impacting trade partners reliant on American demand.

Industry Adaptations and Future Outlook

Banks are already strategizing responses. Some may pivot to fee-based models or bundled services to offset lost interest revenue, as suggested in Reuters’ explainer on reshaping consumer lending. For mortgages, the MBS plan could encourage innovation in securitization, but Zandi emphasizes the need for safeguards against systemic risks, recalling the 2008 crisis triggered by similar instruments.

Consumer advocates offer mixed views. While groups like Consumer Reports applaud efforts to curb predatory rates, they align with Zandi’s warnings about access issues. PBS News coverage captures this tension, quoting experts who advocate for data-driven policies over broad strokes.

As these proposals unfold, monitoring will be key. Zandi’s analysis in Business Insider serves as a sobering counterpoint to Trump’s bold strokes, reminding that in finance, quick fixes often yield complex fallout. With economic indicators flashing caution—rising delinquencies on cards and sluggish home sales—the true test will be whether these measures deliver relief or merely shift burdens elsewhere.