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Some borrowers hurry to grab low rates, fees

Polyana da Costa

Mortgage rates barely moved this week. But many refinancers and potential homebuyers worry the low rates won't last much longer as they try to beat the clock on rising mortgage fees and policy changes on low down payment loans.

30 year fixed rate mortgage – 3 month trend

30 year fixed rate mortgage – 3 month trend

The benchmark 30-year fixed-rate mortgage rose to 3.8 percent from 3.79 percent, according to the Bankrate.com national survey of large lenders. The mortgages in this week's survey had an average total of 0.33 discount and origination points. One year ago, the mortgage index stood at 4.16 percent; four weeks ago, it was 3.66 percent.

The benchmark 15-year fixed-rate mortgage was 3.02 percent, the same as last week. The benchmark 5/1 adjustable-rate mortgage rose to 2.76 percent from 2.75 percent.

Weekly national mortgage survey

Results of Bankrate.com's Feb. 20, 2013, weekly national survey of large lenders and the effect on monthly payments for a $165,000 loan:

30-year fixed 15-year fixed 5-year ARM
This week's rate: 3.8% 3.02% 2.76%
Change from last week: +0.01 N/C +0.01
Monthly payment: $768.83 $1,141.05 $674.47
Change from last week: +$0.94 N/C +$0.87

This is the highest level the 30-year fixed has reached in five months, according to the weekly survey.

Homeowners who still have interest rates above 5 percent are realizing that the low rates are coming to an end, says Michael Becker, a mortgage banker for WCS Funding in Baltimore.

That's especially true for homeowners with larger loans, Becker says. Recently, he has received several inquiries from homeowners who want to pay down the balances of their loans, so that they can be eligible to refinance before rates rise.

"A lot of people are saying 'This may be my last chance,' especially people who tried to refinance in the past -- say, a year ago -- but couldn't do it then," he says.

The Mortgage Bankers Association reports that the volume of mortgage applications has declined for two consecutive weeks in its weekly survey. The index decreased 1.7 percent last week, from a week earlier, the MBA says.

But mortgage professionals say homeowners and homebuyers continue to inquire about their mortgage opportunities and deadlines they may have to watch for. To them, that's an indication that as long as the low rates last, there will be strong demand for refinances and purchase loans.

Deadlines for FHA borrowers

Borrowers who rely on low down payment mortgages, backed by the Federal Housing Administration, have their eyes on two deadlines. On April 1, the FHA will increase its annual mortgage insurance premium by 0.1 percent to 1.35 percent of the balance of the loan. The fee is added to the borrower's monthly mortgage payments.

Borrowers must apply by March 29 to avoid paying the higher fee.

"The FHA has raised its mortgage insurance rates five times in five years," says Dan Green, a loan officer for Waterstone Mortgage in Cincinnati.

Demand for FHA loans normally increases as the fee change date approaches, he says. That means lenders, especially those that specialize in FHA loans, may be busier than usual in a few weeks, so last-minute applicants may have to get in line.

On June 3, the FHA will change its policy on mortgage insurance, requiring borrowers to pay for mortgage insurance for the life of the loan. The current rule automatically drops the insurance fee once the outstanding balance falls to 78 percent of the home's value when the money was borrowed.

Borrowers who owe more than their homes are worth, and want to refinance through the government's Home Affordable Refinance Program, also continue to keep lenders busy.

More than 2 million homeowners have refinanced their mortgages through HARP, the Federal Housing Finance Agency reported Tuesday. HARP refinances accounted for 23 percent of all refinances in November, according to the latest report by the FHFA.

How much time do you have left?

Industry observers don't expect rates to spike overnight, unless the Federal Reserve ends its bond-buying program, known as QE3. But rates have been on the rise even as the Fed spends billions of dollars per month purchasing mortgage and U.S. Treasury bonds.

When in doubt, don't take a chance, says Derek Egeberg, a branch manager for Academy Mortgage in Yuma, Ariz.

"If you can get an interest rate under 4 percent on a 30-year fixed, you are doing so well," he says. "Think of what people went through in the '80s with rates in the 12 percent range."

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