Earlier today, the Federal Housing Finance Agency (FHFA) reported an 8 basis point decline in mortgage interest rates between February and March. However, the decline was due entirely to loans on existing homes. The average contract interest rate on conventional mortgages used to purchase newly built homes actually increased in March, from 3.91 to 4.21 percent, reversing an anomalous drop to under 4 percent that occurred in February.Initial fees dropped on mortgages for both new and existing homes in March, but not enough to offset the movement in contract rates on new home loans. After amortizing initial fees over the estimated life of the loan, the effective rate on new home loans increased from 4.04 to 4.35 percent, moving back into a range typical of the latter half of 2013.
The average price and loan size on conventional mortgages used to purchase newly built homes also reversed previous month declines in March. The average price increased 5.4 percent to $427,200—the second highest number on record.Meanwhile, the average size of a loan used to purchase a new home increased 7.1 percent to $322,600, also the second highest number on record. As the above numbers imply, the average loan-to-price ratio increased in March, from 76.6 to 77.5 percent. Again, this reversed a decline reported for the previous month.
This information is based on FHFA’s Monthly Interest Rate Survey (MIRS) of loans closed during the last five working days in March. For other details about the survey, see the technical note at the end of FHFA’s April 29 news release.