Southwest Florida homebuyers could save a little money under the new mortgage insurance premium reduction taking effect this month on loans backed by Federal Housing Administration.
Borrowers here could spend an average of $446 to $497 per year less with the premium cut, according to an analysis by real estate researcher ATTOM Data Solutions.
That would be in line with the projected average savings nationwide, which some say is not enough to spark an increase in home sales.
“The last FHA premium cut two years ago helped to trigger a relatively short-term jump in home sales to FHA buyers, who are typically first-time homebuyers without much saved up for a down payment,” said Daren Blomquist, senior vice president at ATTOM.
“Prices of homes backed by FHA loans also accelerated higher in the wake of that last premium cut, although that premium cut occurred concurrently with a drop in mortgage rates, a scenario that is less likely this time around,” he said.
The FHA announced this month that it will reduce the annual premiums most of its borrowers pay for mortgage insurance by one-quarter of a percentage point. That takes effect Jan. 27 for most new mortgages for FHA-insured homeowners.
The savings comes as home buyers are facing rising mortgage interest rates.
“After four straight years of growth and with sufficient reserves on hand to meet future claims, it’s time for FHA to pass along some modest savings to working families,” Housing and Urban Development Secretary Julian Castro said in a news release.
The average savings nationwide would be $500 per year, according to Castro, but ATTOM pegs it at a lesser $446.
In Sarasota County, Florida, FHA borrowers could save that same $446 annually, reducing the yearly mortgage insurance premium to $1,168, ATTOM said. That savings would build to $2,232 over five years. The researcher’s example used the average home sale price of $185,000 in 2016 with FHA-backed loans.
In Manatee County, Florida, the insurance savings would average $497 a year, based on a $205,900 sale price.
The FHA had hoped the insurance premium cut in 2015 would bring an additional 250,000 homebuyers into the market over three years. But a study by the American Enterprise Institute found that about half of the additional buying power from the rate cut was either lost through home price increases or used by buyers to go up-market.
