While many observers expect consumer interest rates to rise over the next few months, President Obama will make it easier this week for first-time homeowners to obtain mortgages.
The White House and the Department of Housing and Urban Development said Wednesday that it will lower fees on federally-insured home loans by a half-point.
The move, which will affect mortgages backed by the Federal Housing Administration, is expected to save new borrowers about $900 on an annual basis, according to White House calculations.
Sen. Barbara Boxer (D-Calif.) praised the announcement and noted that she and 17 colleagues–16 other Democrats and Sen. Bernie Sanders (I-Vt.)–last month appealed to the Obama administration to lower premiums.
“This important step will save new homeowners thousands of dollars and help make the dream of home ownership a reality for more families,” she said Wednesday.
FHA premiums have increased five times since 2010, The Washington Post noted, to 1.35 percent from 0.55 percent. In the wake of the Obama administration’s decision, they will fall to 0.85 percent by the end of January.
The White House is predicting this will lead to a quarter of a million new home purchases over the next three years.
In November, a survey conducted by the National Association of Realtors showed that first-time home buyers only made up 33 percent of all purchases, and constituted their lowest share of market transactions in almost three decades. That proportion had fallen by 5 percentage points on an annual basis alone, from 38 percent the previous November.
In December, Fortune reported that the Federal Reserve made “the most direct reference to raising rates” in years, raising the possibility that an interest rate hike and higher borrowing costs are imminent.
