A quarter of a million Americans who have been shut out of the housing recovery may be able to get a mortgage now that President Barack Obama has cut the cost to insure their loans.

Obama’s plan, which was announced yesterday, will provide a jolt to homeownership for borrowers with lower credit scores by reducing the premiums they pay on Federal Housing Administration mortgages, said Brian Chappelle, a partner at consulting firm Potomac Partners LLC in Washington and a former FHA official. The Standard & Poor’s Supercomposite Homebuilding Index rose 4.1 percent yesterday on the expectation of more sales of starter homes.

“It lowers the cost of homeownership, which translates into more borrowers being able to qualify,” Chappelle said. “It’s going to give a shot in the arm to the industry.”

First-time buyers are struggling to get mortgages in a time of tight credit and slow wage growth, stymieing the housing rebound. They also haven’t had as much access to FHA loans, which are meant for lower-income borrowers, after the agency raised premiums to offset losses caused by defaults during the housing crash starting in 2008.

Obama, who is scheduled to give a speech in Phoenix today, will reduce the annual FHA fees to 0.85 percent of the loan balance from 1.35 percent at the end of the month. The typical first-time homebuyer will save about $900 in their annual mortgage payment, according to the FHA.

Homebuilders Rise

“It’s something we felt was too high and has been increased too much,” said Larry Seay, chief financial officer of Meritage Homes Corp., based in Scottsdale, Arizona. “We’re very happy to see that.”

Shares of homebuilder MDC Holdings Inc. jumped 5.6 percent yesterday, the most since November 2013, and KB Home rose 5.3 percent.

Homebuilders likely will focus more on starter homes, especially in outlying areas where land is relatively cheap, if first-time buyers have better access to credit, said Robert Curran, a managing director at Fitch Ratings in New York.

First-time purchasers accounted for about 33 percent of buying in 2014, the lowest share since 1987, according to a survey from the National Association of Realtors released in November. The FHA estimates that as many as 250,000 such Americans will enter the market over the next three years after the premium reductions.

First « 1 2 3 4 » Next