Eye On Housing
After two months of near perfect stability, interest rates on conventional mortgages for newly built homes declined noticeably in October, according to data released this week by the Federal Housing Finance Agency (FHFA). The FHFA data show the average contract rate on the loans dropping from 3.98 to 3.92 percent, while average initial fees and charges went from 1.16 to 1.09. This is the lowest either number has been since June.
The result was an average effective interest rate (which amortizes initial fees over the estimated life of the loan) on loans used to purchase newly built homes that dropped seven basis points to 4.02, after three straight months of hovering near 4.10.
Meanwhile, both the average size of conventional mortgages used to purchase new homes and the average price of the homes purchased with the loans moved off all-time highs posted last month. The average loan amount declined from $358,200 to $349,800, while the average new home price declined from $477,000 to $469,200.
These roughly 2 percent declines kept the loan-to-price ratio on new home mortgages stable at 77.5 percent, and follow on the heels of a particularly strong surge in September.
The above information is based on FHFA’s Monthly Interest Rate Survey (MIRS) of loans closed during the last five working days in October. For other caveats and details about the survey, see the technical note at the end of FHFA’s November 25 news release.
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