NEW YORK (
TheStreet) -- Now that the Federal Reserve has finally announced the start of its "taper," should mortgage shoppers get a move on to beat higher rates?
They probably should, but not because mortgage rates will spike. Instead, borrowers might want to beat fee increases this coming spring from Fannie Mae and Freddie Mac, the two firms that back most new mortgages. The hike could add thousands of dollars to your closing costs.
The smart money says mortgage rates will probably drift up, but slowly; the Fed's decision to cut back on its bond-buying program has been expected for some time and is baked into current mortgage prices.
In fact, the financial markets were thrilled last week when the Federal Open Market Committee said the taper would take all of next year to reduce the monthly bond purchases, now at $85 billion a month, to zero. Those purchases have been designed to keep long-term interest rates low.in a foreclosure. A borrower with a 740 credit score would pay a 1.5% fee with a down payment of 15% or less, but only 0.75% with a 20% down payment. If that buyer could increase his or her credit score to 779, the fee would still be 0.75%. with 20% down. Many lenders, of course, will offer to include the new fee in the loan, but will charge a higher mortgage rate as a result, HSH says. So any homeowner thinking of refinancing should try to beat this fee increase, and should try to work toward a loan-to-value ratio of less than 80%. And anyone looking for a new home might do well to start hunting in the winter rather than wait until the traditional home shopping season begins in the spring.