On August 28, the Federal Housing Finance Agency (FHFA) reported that, overall, mortgage interest rates were flat in July. To a large extent, the same was true for the subset of loans used to purchase new homes. Between June and July, the average contract interest rate on conventional mortgages for new homes ticked down, but only from 4.14 to 4.12. This flat trajectory follows something of a roller coaster ride, with the rate on new home loans dipping under 4 percent twice in 2014 before bouncing back twice earlier in the year.
Meanwhile the initial fees on these loans were also basically unchanged at 1.20 percent in July (compared to 1.18 in June). The result was an average effective interest rate on new home loans (which amortizes initial fees over the estimated life of the loan) that went from 4.27 to 4.25 percent.
While the changes to terms on the loans were very small, the average size of conventional mortgages used to purchase new homes, well as the price of the new homes purchased with the loans, increased by more than one percent. The average loan size increased from $316,000 to $320,100. The average price of a new home purchased increased from $417,500 to $423,800. In both cases, the number was higher in July than it was in May or June, but lower than in April or May, or at the time of a spike that occurred right at the beginning of the year.
This information is based on FHFA’s Monthly Interest Rate Survey (MIRS) of loans closed during the last five working days in July. For other caveats and details about the survey, see the technical note at the end of FHFA’s August 28 news release.