Rates Remain Low but Higher Loan Fees May Change That

Mortgage rates are expected to remain low for now, but borrowers will face higher loan fees, which will translate into slightly higher interest rates or points for borrowers. That’s because the guarantee fee on loans that can be sold to Fannie Mae and Freddie Mac is set to increase by a minimum of 10 basis points.  The hike doesn’t take effect until April 1st, but lenders have already started to pass the extra cost on to borrowers.

The slightly higher costs should not have a major impact on the demand for mortgage loans because rates will remain attractive, Walsh says, owner of a mortgage company in CT.

 “Still, I don’t like anything that takes steam out of the purchase market,” he says. “This country desperately needs the housing market to get back on its feet. That’s why the Fed is trying to keep rates artificially low.”

The Fed says it will keep the key federal funds rate near zero until mid-2013 and continues to reinvest in long-term securities to help keep rates low.

But Congress has pushed rates in the opposite direction. The Fannie and Freddie hikes resulted from the extension of the payroll tax cut, passed in late December. The tax cut, which allows workers to take home a larger share of their pay, was extended for another two months. Congress mandated Fannie and Freddie to raise their fees to make up for the nearly $36 billion cost of the extension.

RATE FORECAST
Jan 12th, 2012

Will rates rise or remain relatively unchanged this week?
Industry experts and analysts provide their insights.
·       6% of respondents expect rates to fall in the coming weeks  
·       47% predict a further increase in mortgage rates while the remaining  
·       47% forecast that mortgage rates will remain more or less unchanged

 

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