The Obama Administration’s newly unveiled housing finance plan may have clouded the picture for policymakers, lenders and bond buyers, but it made the future for borrowers starkly clear: It’s going to cost more to get a home loan. Mortgages have already become more expensive in recent weeks, as Fannie Mae and Freddie Mac began adding risk fees to almost all of the loans they sponsor. Average rates on 30-year fixed rate-loans have already moved from 4.4% in November to 5.2% now, according to Mortgage Marvel, a loan comparison web site. In a much-awaited report released Friday, the administration proposed winding down the role of the two government-sponsored mortgage repackagers and left open for prolonged Washington debate what would remain in their place. It also called for higher down payments, a lower cap on the amount of mortgage that could be guaranteed and another increase in the fees Freddie and Fannie charge in the short term. All of those measures are likely to steepen the cost of securing a home mortgage.
“Rates are probably on the rise, due to the increases in fees,” said Keith Gumbinger of HSH Associates, a mortgage research firm. “But will the borrowing process get better, faster or easier as a result of reforms? No.”If you can effect a transaction now, it’s probably not a bad idea,” Gumbinger said
Rates are also likely to rise as the economy improves and the rock-bottom interest rates that have been protected by the Federal Reserve Board edge up. The rising credit market rates will have a bigger effect on mortgages than the winding down of Freddie and Fannie, said Scott Happ, president of Mortgagebot, a company that builds and runs mortgage web sites. The cost of loans that are not handled by the guaranteed mortgages and those that aren’t guaranteed is roughly 0.6 percentage points now, he said.