For the first time, the federal government will back mortgages of more than $1 million, a move that reflects the run-up in home prices across much of the nation.

The Federal Housing Finance Agency (FHFA) on Tuesday said the maximum size of home-mortgage loans eligible for backing by Fannie Mae and Freddie Mac will jump to $1.089 million next year in high-cost markets. In most other markets, the maximum size of mortgages eligible for backing will be $726,200 in 2023, an increase of 12% from current limits, the agency said.

The new threshold means that more loans will qualify as so-called “conforming” loans, or mortgages that meet Fannie Mae and Freddie Mac’s funding criteria and can be resold to investors. On a practical level, the higher limits for conforming loans could provide some relief to buyers of higher-priced properties because these mortgages typically offer lower interest rates.

The FHFA regularly resets its limits for conforming loans to reflect changes in real estate values — and home prices have surged during the pandemic. Since early 2020, the median sale price of a U.S. home has jumped almost 40% as record-low mortgage rates and work-from-home orders fueled a surge in demand for home ownership.

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