SDI Productions As of Tuesday, those who refinance mortgages backed by Fannie Mae or Freddie Mac will have an extra 0.5% tacked on if they are more than $125,000. That means someone with an average loan of $280,000 would have $1,400 added to their loan amount. Over 30 years, that translates to $6 a month, assuming a fixed interest rate of 2.9%. Refinancing—which often allows borrowers to lower the rate on an existing loan in exchange for fees—has boomed this year. In fact, homeowners are refinancing at twice the pace they did a year ago, thanks to the ultra low interest rates brought on by the pandemic. The average interest rate on a new 30-year fixed-rate mortgage has stayed below 3% for months and continues to break records. The new fee, announced over the summer, helps Fannie and Freddie cover what they estimated then to be $6 billion in losses stemming from pandemic-related homeowner relief. The government has ordered a moratorium on foreclosures on federally-backed mortgages and has offered most homeowners the option to suspend their mortgage payments for up to a year. The adverse market fee should “not make much of a dent” in this demand, according to Adam DeSanctis, director of public affairs for the Mortgage Bankers Association. However, by next year, a recovering economy is likely to put upward pressure on inflation and interest rates, especially if there is another round of stimulus from the government, he said. “If you are a homeowner considering refinancing, now is the time to do so, because rates are going to slowly rise next year,” DeSanctis said.
