Data released today by the Federal Housing Finance Agency (FHFA) shows a one basis point decline in the average contract interest rate on conventional loans used to purchase newly built homes. Small as this change was it took the contract rate on new home loans down to 3.77 percent in May—which is the lowest it’s been since June of 2013.
The effective rate on the loans is determined in part by initial fees and charges. However, at 1.11 percent, the average fee on new home loans was at the lower end of the range it has occupied over the past two years.
As a result, the average effective rate (which amortizes initial fees over the anticipated life of the loan) on new home loans declined by three basis points in May, to 3.89 percent. Again, this represents a post-June 2013 low point.
Meanwhile, the average size of conventional loans used to purchase new homes edged up by $1,000 to $343,000 in May, which is an all-time high.
The average price of the new homes purchased with the new homes was $447,600 in May. While the loan size reached an all-time high, the loan-to-price ratio also increased, so the average new home price was not quite as high in May as it had been previously in February and April of this year.
The information presented above is based on FHFA’s Monthly Interest Rate Survey (MIRS) of loans closed during the last five working days in May. For other details about the survey, see the technical note at the bottom of FHFA’s June 25 news release.