Tapering Didn't Boost Mortgage Rates, But Fannie and Freddie Fee Hikes Could

Friday, 20 Dec 2013 07:27 AM

By Dan Weil

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Mortgage rates didn't move much after the Federal Reserve announced a tapering of its bond buying Wednesday, but fee increases by Fannie Mae and Freddie Mac could push rates higher, CNBC reports.

The 30-year fixed mortgage rate stood at 4.52 percent Thursday, barely changed from 4.45 percent a week ago, according to Bankrate.

"I was relieved by how the market has reacted so far and that we didn't see a sharp rise in interest rates as a result of the Fed telling us that they were going to start tapering," Craig Strent, CEO of Apex Home Loans in Rockville, Md., tells CNBC.

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The market appreciated the Fed's clarity on interest rates, he says.

"Mortgage interest rates generally hate the idea of uncertainty, so this definitely brings some certainty in terms of the Fed showing their cards as far as the direction of rates."

But the more important news may have come Monday, when Fannie and Freddie announced they are increasing mortgage guarantee fees to lenders. The fees will inevitably be passed along to homebuyers.

"If you're a first-time home buyer who's looking to put less than 20 percent down, you could see mortgage rates rise by as much as 0.4 percentage point," Christopher Meyer, a real estate professor at Columbia University Business School, tells CNBC.

"A borrower with a 750 credit score and 15 percent down would likely get a rate of 4.625 percent now but will get closer to a 4.875 percent rate when the new loan pricing goes into effect in March," Matthew Graham at Mortgage News Daily explains.

"When the changes actually take place is a bit of a moving target, because different lenders will adjust their pricing at different times. Still, we can expect to see rates move up as early as January."

Meanwhile, housing starts hit a five-year high in November, the government reported Wednesday.

"The economy seems to be picking up, and there's quite a lot of pent-up demand," David Sloan, a senior economist at 4Cast, tells Bloomberg.

"Even if the Fed does start to taper, I think the housing market will prove resilient," he said before the Fed's move Wednesday.

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