In June, interest rates on conventional mortgages used to purchase newly built homes increased slightly while the size of the loans declined, according to data released today by the Federal Housing Finance Agency (FHFA). The new FHFA data show that the average contract interest rate on conventional loans for newly built homes increased 11 basis points to 3.52 percent, back to where it had been in April. Initial fees on the loans declined (from 1.30 to 1.12 percent), but the effective rate after amortizing the fees was still up 9 basis points, to 3.64 percent.
Also in June, the average term on conventional loans for new homes was little changed at 28.6 years, while the average amount of the loan declined for the second month in a row, from $300,200 to $295,800. Although the average loan amount has fluctuated up to $305,000 a couple of times over the past 8 months, $295,800 is still higher than it had been at any time prior to November of 2012 (the history goes back to 1973).
Meanwhile, the average price of a new home purchased with a conventional loan declined from $395,300 to $387,700. The price decline was somewhat greater than the decline in loan size, so the average loan-to-price ratio on conventional mortgages for new homes increased to 78.4 percent (from 77.9 percent in May).
This information is based on FHFA’s Monthly Interest Rate Survey (MIRS) of loans closed from June 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 July 30 news release.