On Tuesday, January 11th, 2022, the average APR on a 30-year fixed-rate mortgage fell 1 basis point to 3.471%. The average APR on a 15-year fixed-rate mortgage rose 3 basis points to 2.642% and the average APR for a 5/1 adjustable-rate mortgage (ARM) rose 8 basis points to 3.004%, according to rates provided to NerdWallet by Zillow. The 30-year fixed-rate mortgage is 25 basis points higher than one week ago and 49 basis points higher than one year ago. [A basis point is one one-hundredth of one percent. Rates are expressed as annual percentage rate, or APR.]
In addition, last week, the Federal Housing Finance Agency (FHFA) announced increases to fees for high balance loans and second home loans sold to Fannie Mae and Freddie Mac. This will have a negative impact on interest rates on these types of loans going forward.
So, what does that mean? High balance loans are mortgages in high-cost areas (like the DMV) between $647,201 and $970,800. The impact will depend on the loan-to-value ratio, but you should expect rates for those loans to be .125% higher than they would have been if this change had not been made. Of course, no one wants a higher rate, but the increase is relatively mild.
However, for second home mortgages, the change will be more impactful. Borrowers could see rates between .25% and 1% higher than they would have been otherwise. I am sure that the biggest hits will be on the higher loan-to-value mortgages. Second home mortgages have historically been either the same or slightly higher than owner-occupied mortgages. These might now in fact be closer or the same as investor loans.
These changes go into effect on April 1, but we'll start to see it filter into pricing soon.
What this means for new homebuyers as well as those who are considering refinancing their mortgages: move soon to lock into today's rates as they are creeping back up again.