The Biden administration announced a cut to mortgage insurance premiums for loans backed by the Federal Housing Administration, anticipating average annual savings of $800 for about 850,000 borrowers over the next year. 

Premiums will be reduced from 0.85% to 0.55% for mortgages signed on or after March 20. The average FHA borrower with a $265,000 mortgage will save about $800 per year, while a borrower with a mortgage of $467,700, the national median home price as of December 2022, will save more than $1,400 per year, the Department of Housing and Urban Development said. 

“At a time when budgets are tight, and homeownership is out of reach for too many, FHA’s premium reduction will allow more households to access the stability and wealth creation of homeownership, particularly the first-time homebuyers and families of color who rely heavily on affordable FHA-insured mortgages,” Assistant Secretary for Housing and Federal Housing Commissioner Julia Gordon said in a press release. “For many families, the savings will make the difference in their ability to purchase the home of their choice.” 

Existing FHA-backed loans, which are typically used by low- and middle-income homeowners and first-time buyers, will not be affected. Conventional mortgages not backed by the FHA will not be affected either. 

The premium reduction comes as the Biden administration seeks to address the cost of homeownership, which has soared as interest rates and housing prices have risen over the last year. 

“Today, we are building on the steps we’ve taken to make homeownership more affordable, and HUD is acting to ensure people feel comfortable purchasing a home as they build toward their future,” HUD Secretary Marcia Fudge said. “As we reduce housing costs for people with FHA mortgages, we continue our work to address longstanding disparities in homeownership.”