Fannie Mae and Freddie Mac will raise lending ceilings in the next few weeks, making it more straightforward for buyers of more expensive homes to obtain financing.

In low-cost markets, the conforming loan maximum is likely to grow to $650,000 and roughly $1 million in high-cost markets. For single-family homes, the current conforming loan limitations are $548,250 and $822,375, respectively.

The regulator overseeing the two mortgage behemoths is expected to release the exact lending limitations on Nov. 30. The new limits will take effect in January.

The increased loan limits should make it easier and less expensive for purchasers to obtain a mortgage for sums just over Fannie Mae and Freddie Mac’s current restrictions.

Lenders are more eager to issue loans they know will be sold to government-sponsored enterprises, and they usually charge cheaper interest rates and don’t require large down payments.

Low mortgage interest rates and buyers searching for more space during the epidemic have helped fuel the recent property price rise, along with a severe scarcity of new dwellings.

“Housing prices are expensive,” said Steve Walsh, president of Scout Mortgage in Scottsdale, Ariz., adding that some of his clients are unable to qualify for loans for modest-sized homes under the current limits.

“I don’t believe these people are looking for a castle, just a three-bedroom house with a backyard,” Mr. Walsh said.

According to the National Association of Realtors on Nov.10, the median single-family existing-home sales price increased 16 percent year over year in the third quarter to $363,700, a new high since 1968.

However, some housing experts believe that the predicted increase in loan limitations raises questions about the government’s role in housing and whether taxpayers should effectively backstop sky-high housing prices at a time when Fannie and Freddie’s market share is already increasing, reported The Wall Street Journal.

According to the Urban Institute, a Washington think tank that does economic and social policy research, the companies’ market share increased to about 60% of all new mortgages during the epidemic, up from around 42% in 2019.

The restrictions are in place because purchasers who can afford huge homes rarely require a government-backed loan. Fannie Mae and Freddie Mac guarantee about half of the $11 trillion mortgage market, which benefits first-time purchasers and moderate-income borrowers.

During the pandemic, government-sponsored entities loosened the screws. Fannie and Freddie have been lending to borrowers with weaker credit scores, and Fannie has begun to include rent payments when evaluating mortgage applicants’ trustworthiness, reported The real deal.

Borrowers should benefit from the increase in conforming loan limits, but other challenges are on the horizon. Guidelines for jumbo loans that exceed the conforming loan ceiling are becoming more stringent.

The Federal Reserve has indicated that it intends to reduce its billion-dollar bond-buying program, potentially rising mortgage rates.

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