This morning, the Federal Housing Finance Agency (FHFA) reported that interest rates on home mortgages increased slightly in March. The same was true for the subset of mortgages used to purchase new homes.
On conventional mortgages used to purchase newly built homes, the average contract rate and average initial fees and charges each increased by 2 basis points. The contract interest rate increased from 3.79 percent to 3.81, and the initial fees and charges increased from 1.11 percent to 1.13. The result was an average effective interest rate (which amortizes initial fees over the estimated life of the loan) that edged up from 3.91 to 3.93 percent. That marks the second month in a row that the effective rate has been below 4 percent, following 19 consecutive months above that threshold.
Meanwhile, the average size of the conventional loans used to purchase newly built homes continued to inch toward $340,000, increasing by $400 to $339,000 in March, which is an all-time high.
However, the average price of the new homes purchased with the loans in March declined by $3,800 (a little under 1 percent) to $445,700. Consequently the loan-to-price ratio moved back up over 78 percent for the first time in three months.
The information in this post is based on FHFA’s Monthly Interest Rate Survey (MIRS) of loans closed during the last five working days of March. For additional caveats and information about the survey, see the technical note at the end of FHFA’s April 28 news release.