Earlier today, the Federal Housing Finance Agency (FHFA) reported a 5 basis point increase in mortgage interest rates for the month of October. However, the increase was due entirely to loans on existing homes. The effective interest rate on conventional loans used to purchase newly built homes, meanwhile, remained unchanged.
In fact, the average contract rate on the new home loans actually inched down by one basis point in October, to 4.10 percent. However, this small change was completely offset by average initial fees and charges, which rebounded to 1.21 percent (from 1.09 percent in September).
The combination produced an average effective interest rate (i.e., after amortizing initial fees over the loan’s estimated life) on new home loans that remained unchanged in October, at 4.23 percent. The average effective rate on new home loans has been quite stable in the recent past, showing very little movement in either direction since June.
While interest rates remained stable on average in October, the average price and loan size on conventional mortgages used to purchase newly built homes both increased for the second month in a row. The average price increased by nearly $10,000, from $422,300 to $432,200, which is the third highest number on record (having topped $434,000 in January and April of this year).
This information is based on FHFA’s Monthly Interest Rate Survey (MIRS) of loans closed during the last five working days in October. For other details about the survey, see the technical note at the end of FHFA’s November 25 news release.