Federal Refinance Loan Changes Affect Home Loan Interest Rates

Kudzaishe Mugara works in the Texas financial community and holds a managing director role with JPMorgan Chase, where he focuses on boosting home lending engagement. With an extensive knowledge of mortgage markets, Kudzaishe Mugara stays informed on developments in his industry.

A recent Washington Post article drew attention to a gradual move toward higher interest rates, after record lows were tested. With the rate at 3.55 percent a year ago, Freddie Mac reported that the 30-year fixed-rate average ticked upward from 2.96 percent in early August to 2.99 percent in late August. In addition, there was an average 0.8 point, representing the fees paid to the lender, in addition to the interest rate.

One economist placed the reason for this shift on a “surprising” new federal policy that increases expenses associated with refinance loans. From September onward, the Federal Housing Finance Agency announced a refinance transaction price adjustment of 0.5 percent of the total loan amount on all Freddie Mac and Fannie Mae-originated transactions. This fee is described as intended to mitigate future default risk attributed to the conforming loans that the agencies guarantee. Because this new fee does not involve purchase loans, it will not directly impact home buyers. It is also not applicable to jumbo loans and other non-conforming loans.