: As interest rates rise, Biden administration will reduce the cost of some mortgages by $800 per year

by | Feb 23, 2023 | Stock Market

The federal government said Wednesday that it’s lowering the cost of certain federal mortgages by an average of $800 per year, lowering housing costs for an estimated 850,000 homebuyers and homeowners in 2023. The Biden administration announced that through the Federal Housing Administration, it was reducing the annual mortgage insurance premium on FHA-insured mortgages from 0.85% to 0.55% for most new borrowers.

The premium is a monthly fee that homeowners with FHA-insured mortgages pay to have their loans insured, and is paid on top of their monthly principal and interest payments. “Today’s announcement is an important step in making homeownership more attainable,” the Biden-Harris administration said in a statement. “This cost-lowering measure will make buying a home more attainable and affordable for more low- and middle-income borrowers.” More than 80% of FHA borrowers are first-time home buyers, the government added, and over a quarter are buyers of color. The average home purchased with an FHA-insured mortgage is on average less than $270,000. In contrast, the median price of an existing-home in the U.S. was $359,000. Lowering the mortgage insurance premium by 0.3 percentage points helps homeowners save $900 per year if they buy a home with a $300,000 mortgage, and as much as $1,500 per year if they take out a $500,000 mortgage, the government said. The move to reduce premiums is aimed to help consumers balance the rising cost of mortgages. Would-be buyers are facing …

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