The Obama administration cut mortgage-insurance premiums charged under a government program that’s popular with first-time homebuyers with little money for a down payment. It’s a move that may ease the burden of rising interest rates.
The annual fees the Federal Housing Administration charges to guarantee mortgages it backs are being cut by a quarter of a percentage point, the Department of Housing and Urban Development said in a statement on Monday.
With the reduction, the annual cost for most borrowers will be 0.60 percent of the loan balance.
The cut would take effect on Jan. 27.
The change — which could be reversed after President-elect Donald Trump takes office — may hurt bond investors, as it speeds up repayment on some securities.
Private insurers that compete with the FHA also could suffer. Shares of insurers MGIC Investment Corp., Radian Group and Essent Group fell 2 percent to 3 percent after the announcement.
The reduction, which lowers the cost of a home for those who use the FHA, is charged to mortgage borrowers. HUD on Monday said the fee cut would save new FHA-insured homeowners an average of $500 this year.