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.
The FOMC also signaled that it probably would not start raising short-term rates for two years. So not many experts foresee a spike in loan rates.
But Fannie and Freddie, the government-owned companies, are raising a key fee to offset risks and help a government effort to rekindle the market for loans that are not backed by these two firms. As a result, closing costs will rise as lenders work the new fees into loan prices, perhaps as soon as March.