Why This Article Was Flagged
The article raises alarm about how China’s sale of U.S. mortgage-backed securities (MBS) could harm the housing market and drive mortgage rates higher. Given its significance to homeowners and real estate investors, our team fact-checked this story to determine whether its claims are supported, exaggerated, or missing key context.
Understanding the Background
China and other nations have long held U.S. government-backed mortgage securities as part of their foreign reserves. Concerns over these holdings intensify during periods of geopolitical tension, as foreign divestment could theoretically influence U.S. interest rates. During past trade conflicts, such as the 2018–2019 U.S.-China tariff standoff, similar fears surfaced. However, the actual impact of such sales has remained limited, and Treasury markets have historically absorbed foreign sell-offs without enduring chaos.
Fact-Check of Key Claims
Claim #1: “China is one of the largest holders of agency mortgage-backed securities, or MBS.”
This claim is accurate but needs context. China does hold a large share of agency MBS, but it is not the largest by a significant margin. According to Ginnie Mae and data from the Treasury Department, foreign holdings of U.S. MBS totaled roughly $1.32 trillion as of January 2025. China’s share was substantial, though Japan consistently holds more. As of late 2024, China held approximately $175 billion to $180 billion in MBS, while Japan’s stake hovered closer to $250 billion. Thus, while China is a key player, the article’s emphasis arguably inflates its singular impact.
Claim #2: “If China and Japan were to accelerate MBS sales, mortgage rates would rise even more.”
This is partially accurate but oversimplified. Mortgage rates are influenced by a wide range of complex factors including Federal Reserve policy, inflation expectations, and investor appetite for risk. Foreign selling of MBS could contribute to upward pressure on yields, but the impact would likely be incremental rather than catastrophic. A Federal Reserve research paper in 2021 found that even significant foreign sales of Treasurys had only modest and temporary effects on long-term yields. The mortgage market is large and liquid, and multiple domestic and institutional investors help buffer these effects.
Claim #3: “China had already begun selling off some U.S. MBS last year, with holdings down 8.7% by September and 20% by December.”
This claim is verifiable and largely accurate. According to data from the U.S. Treasury’s International Capital (TIC) system and Ginnie Mae, China’s holdings of U.S. agency MBS did decrease through much of 2024. However, attributing this to retaliation or geopolitical motivations lacks clear evidence. Analysts suggest these movements may reflect broader portfolio rebalancing or risk management practices, not necessarily a coordinated countermeasure to U.S. tariffs or trade actions. Without direct confirmation from Chinese authorities, the motivation remains speculative.
Claim #4: “The Federal Reserve is letting MBS roll off its portfolio, adding pressure to the mortgage market.”
This is true. The Federal Reserve began reducing its balance sheet in 2022 by allowing MBS to mature instead of reinvesting, a process known as quantitative tightening. As of early 2025, the Fed continues to let upward of $35 billion in MBS roll off monthly based on cap limits. This does put some upward pressure on mortgage rates, but it’s a managed and publicly communicated process. The combination of Fed tightening and foreign MBS reductions could have an amplifying effect—but both are tempered by strong domestic demand and evolving interest rate expectations.
Final Verdict: What the Facts Reveal
The CNBC article accurately describes some valid economic concerns but veers toward alarmism in tone and presentation. While it’s true that foreign nations selling MBS could influence mortgage rates, the article leans into worst-case scenarios without full acknowledgment of market resilience, alternate buyers, or the multifaceted nature of interest rate formation. Statements about China “crushing” the U.S. housing market overstate Beijing’s leverage and oversimplify the effects of MBS divestments. Overall, the piece mixes facts with speculative framing, which risks misleading readers about the true scale and immediacy of the threat.
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Read the Original Article
To view the article we investigated, visit: https://www.cnbc.com/2025/04/09/how-china-could-crush-the-us-housing-market.html
