Biden administration hopes to boost housing market by cutting mortgage insurance premiums

WASHINGTON (TND) — Higher mortgage rates have put many Americans' home-buying dreams on hold but relief could be on the way to save buyers some money.

As part of President Joe Biden's new budget, the administration introduced a plan to cut mortgage insurance premiums for FHA loans by 30%, which the government says will help hundreds of thousands of borrowers with and save families an average of $800 annually.

"The President’s Budget includes a historic investment to lower housing costs, expand housing supply, improve access to affordable rental options and homeownership, and advance efforts to end homelessness. The Budget includes both mandatory and discretionary housing investments, totaling more than $175 billion," a White House fact sheet reads.

According to the Department of Housing and Urban Development, homebuyers who put down less than 20% have to pay the added cost of private mortgage insurance.

HUD says this reduction will make owning a home more affordable, particularly for first-generation homebuyers and first-time homebuyers of color, who they say are less likely to have the resources for a large down payment.

One expert in real estate finance says the Federal Reserve’s upcoming interest rate decision could impact the housing market.

“Where it's going to go really depends on whether the Federal Reserve decides to pause raising interest rates or they decide to slow down their increases,” said Dr. Jonathan Burson, an assistant professor of finance at Cedarville University.

According to the Biden administration, the reduction will help about 850,000 borrowers over the coming year, boosting the housing market as a whole.

“If you are a homeowner right now and you're looking to move to get into a different house and you want to sell that house and a first-time home buyer is looking for a house and your house fits the bill, that can be very helpful because now you can move,” Burson said. “It's going to help the whole overall economy in terms of moving houses that are on the market.”

The plan will take effect on Monday, March 20.

"The budget proposes investments and actions that will lower costsfor renters and homebuyers, make our economy stronger and more resilient, and advance equity, economic opportunity, and fair housing principles that are central to the President’s economic agenda," the White House says.