Conforming loan limits to rise in '05

WASHINGTON, Nov 30 (Reuters)



U.S. mortgage finance giants Fannie Mae and Freddie Mac may boost their loan purchase limits to $359,650 from $333,700, their federal regulator said on Tuesday, lowering borrowing costs for buyers of more expensive homes.

The enterprises are permitted to adjust their loan purchase caps once a year by the rate of change in the October average U.S. house price from the same month a year earlier. The average U.S. home price rose last month by 8.5 percent to $264,540 from $243,756 in October 2003, the Federal Housing Finance Board said earlier.

Home buyers who borrow under the enterprises' purchase ceiling, known as the conforming loan limit, can get mortgages with interest rates about a half-percentage point lower than for bigger loans.

Fannie Mae (FNM.N: Quote, Profile, Research) and Freddie Mac (FRE.N: Quote, Profile, Research) last year erred in determining their loan limit. The change for 2005 was calculated from $331,400, the enterprises' regulator, the Office of Federal Housing Enterprise Oversight, said in a statement.