Interest rates on conventional mortgages for newly built homes fell again in August 2016 according to data released by the Federal Housing Finance Agency (FHFA), extending the decline to 7 consecutive months.
The FHFA data show that the average contract rate on the loans fell from 3.64% to 3.60%, while initial fees and charges went from 1.11% to 1.09%. As a result, the average effective interest rate on loans used to purchase newly built homes, which amortizes initial fees over the estimated life of the loan, dropped to 3.68% from 3.74%.
The effective interest rate on loans used to purchase newly built homes has not risen since the end of 2015. In January, the effective rate ticked up slightly from its December 2015 level, but in each subsequent month the rate has dropped. Over 2016, effective interest rates have fallen 35 basis points. The decline in the effective rate reflects a 34 basis point drop in the contract rate. However initial fees and charges are 3 basis points higher than their level at the beginning of the year, 1.06%.
The above information is based on FHFA’s Monthly Interest Rate Survey (MIRS) of loans closed during the last five working days in August. For other caveats and details about the survey, see the technical note at the end of FHFA’s September 28 news release.