Rates Rise Again on Loans for New Homes

In July, interest rates on conventional mortgages used to purchase newly built homes increased for the second month in a row, according to data released yesterday by the Federal Housing Finance Agency (FHFA).  The new FHFA data show the average contract interest rate on conventional loans for newly built homes increasing by nearly 4 tenths of a percent, to 3.94 percent.  Initial fees were little changed, so the effective rate on the loans (after amortizing the fees) was also up roughly 4 tenths of a percent, to 4.07 percent.  Meanwhile, the average term on conventional new home loans continues to hover around 28 and half years (28.4 years in July).Rate C Jul13After the July increases, both the contract rate and effective rate on new home loans were higher than they’ve been at any time since January of last year.Rate E Jul13

The FHFA release also includes data on loan size and house prices. After two months of declines, the average size of new home loans and price of the homes purchased with the loans both increased in July.  The loan amount increased from $295,800 to $303,300, while the purchase price increased from $387,700 to $394,400.  Because the loan size increased by a few hundred dollars more than the purchase price, the average loan-to-price ratio on conventional mortgages for new homes edged up—from 78.4 to 78.6 percent, the highest it’s been since 2011.

LTV Jul13This information is based on FHFA’s Monthly Interest Rate Survey (MIRS) of loans closed during the last five working days in July.  Loan terms are typically established 30 to 45 days before closing.  For other caveats and limitations of the survey, see the technical note at the end of FHFA’s August 29 news release.

7 Responses to Rates Rise Again on Loans for New Homes

  1. […] leveling off in the share of consumers planning to purchase a new home may capture the effect of increasing mortgage interest rates. In fact, the share of respondents expecting higher interest rates in the next 12 months increased […]

  2. […] leveling off in the share of consumers planning to purchase a new home may capture the effect of increasing mortgage interest rates. In fact, the share of respondents expecting higher interest rates in the next 12 months increased […]

  3. […] Lot shortages are one of several barriers that have arisen, restraining builders from responding completely to increased demand.  Other barriers include a shortage of labor in carpentry and other key building trades, limited availability of loans even for credit worthy home builders and home buyers; and, more recently, an uptick in interest rates. […]

  4. […] The drop is the result of the jump in mortgage interest rates that began in May and accelerated in late June. The rise in rates first caused some acceleration in contract signing, as June sales were 3.6% above May even as mortgage rates rose about 50 basis points. Further increases caused buyers to pause in July. According to Federal Housing Finance Agency (FHFA) data, the average effective rate for loans for newly built homes increased for the second consecutive mont…. […]

  5. […] cutbacks at local building departments have emerged as another obstacle to builders (along with rising interest rates and shortages of labor,  building materials and lots), impeding their ability to respond quickly […]

  6. […] cutbacks at local building departments have emerged as another obstacle to builders (along with rising interest rates and shortages of labor,  building materials and lots), impeding their ability to respond […]

  7. […] cutbacks at local building departments have emerged as another obstacle to builders (along with rising interest rates and shortages of labor,  building materials and lots), impeding their ability to respond quickly […]

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