Reversing a two-month trend, interest rates on loans for new homes declined slightly in May, according to data released today by the Federal Housing Finance Agency (FHFA). The average contract rate on conventional loans for newly built homes dipped 11 basis points to 3.41 percent, the lowest it’s been since February. Although initial fees and charges on the loans increased from 1.18 to 1.30 percent, the resulting effective rate (amortizing the initial fees) for loans on new homes also dipped 11 basis points, to 3.55 percent.
The average term on loans for new homes in May was 28.5 years—up half a year from April, but staying within the 28-29 year range that has prevailed since early 2012. The average price of a new home purchased with a conventional loan in May was $395,300, and the average loan amount was $300,200. Both the average price and loan amount were lower than in April, but still higher than they were in March.
The average loan amount declined by less than average price, so the average loan-to-price ratio on conventional mortgages for new homes increased from 76.4 percent in April to 77.9 percent in May.
This information is based on FHFA’s Monthly Interest Rate Survey (MIRS) of loans closed from May 25 to the end of the month. Loan terms are typically established 30 to 45 days before closing. For other caveats and limitations of the survey, see the technical note at the end of FHFA’s June 27 News Release.