Contract Rate on New Home Loans Dips Under 4 Percent

June 26, 2014

On average, mortgage interest rates declined in May, according to data released earlier today by the Federal Housing Finance Agency (FHFA).  On conventional mortgages used to purchase newly-built homes, the average contract interest rate dropped by more than 30 basis points, from 4.19 to 3.88 percent.  This is the lowest the new home loan rate has been in a year and the first time it has dipped below 4.0 percent since February.

Contr Rate May 14

Initial fees increased slightly during the month, from 1.22 to 1.25 percent—far from enough to offset the decline in the contract rate.  The result was an average effective rate on new home loans (which amortizes initial fees over the estimated life of the loan) that also dropped by more than 30 basis points, staying barely above 4.0 percent (at 4.01).

Eff Rate May 14

Reversing the trend of the prior two months, the average size of conventional mortgages used to purchase new homes—and the price of the new homes purchased with the mortgages—both declined in May.  The average loan size declined 1.8 percent to $319,800, while the average home price fell by 3.6 percent to $418,800.  Despite the declines, both the average loan size and average new home price remain higher than they had been at any time prior to 2014.

Because the change in price was greater than the change in loan size, the average loan-to-price ratio on conventional mortgages used to purchase new homes increased substantially in May, from 77.0 to 78.6 percent—the highest it’s been since last August, and the first time above 78.0 percent in 2014.

LTP May 14

This information 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 end of FHFA’s June 26 news release.


Rates on New Home Loans Remain Stable

May 29, 2014

The average characteristics of conventional mortgages used to buy newly built homes were little changed in April, according to data released earlier today by the Federal Housing Finance Agency (FHFA).  The average contract interest rate declined a scant 2 basis points to 4.19 percent, while the average initial fees and charges increased by a single basis point to 1.22 percent.  As a result, the effective interest rate (which amortizes initial fees over the estimated life of the loan) also declined by 2 basis points, to 4.33 percent.Eff Rate May 14Meanwhile, the average size of the conventional mortgages used to purchase newly built homes increased from $322,600 to $325,800 in April, while the average price of the new homes purchased with the loans went from $427,200 to $434,500. This is the second consecutive month during which both the loan size and new home price both increased, although neither is yet quite back to the peak it reached in January.Loan Size May 14Price May 14This information is based on FHFA’s Monthly Interest Rate Survey (MIRS) of loans closed during the last five working days in April. For other details about the survey, see the technical note at the end of FHFA’s May 29 new release.


Rates on New Home Loans Back Up Over 4%

April 29, 2014

Earlier today, the Federal Housing Finance Agency (FHFA) reported an 8 basis point decline in mortgage interest rates between February and March. However, the decline was due entirely to loans on existing homes. The average contract interest rate on conventional mortgages used to purchase newly built homes actually increased in March, from 3.91 to 4.21 percent, reversing an anomalous drop to under 4 percent that occurred in February.Contr Rate Apr 14Initial fees dropped on mortgages for both new and existing homes in March, but not enough to offset the movement in contract rates on new home loans. After amortizing initial fees over the estimated life of the loan, the effective rate on new home loans increased from 4.04 to 4.35 percent, moving back into a range typical of the latter half of 2013.

The average price and loan size on conventional mortgages used to purchase newly built homes also reversed previous month declines in March. The average price increased 5.4 percent to $427,200—the second highest number on record.Avg Price Apr 14Meanwhile, the average size of a loan used to purchase a new home increased 7.1 percent to $322,600, also the second highest number on record. As the above numbers imply, the average loan-to-price ratio increased in March, from 76.6 to 77.5 percent.  Again, this reversed a decline reported for the previous month.

This information is based on FHFA’s Monthly Interest Rate Survey (MIRS) of loans closed during the last five working days in March. For other details about the survey, see the technical note at the end of FHFA’s April 29 news release.


New Home Loans: Rate Edges Down, Purchase Price Up

January 30, 2014

Earlier today, the Federal Housing Finance Agency (FHFA) reported a slight (3 basis point) rise in mortgage interest rates for December.  However, the rise was driven entirely by loans used to purchase existing homes.  The average contract interest rate on conventional mortgages for new homes actually moved slightly in the opposite direction from 4.26 to 4.24 percent.

Eff Rate Dec13

Initial fees, which have the potential to offset a small change in the contract interest rate, edged down on mortgages for both new and existing homes.  On mortgages for new home loans, the decline in initial fees was from 1.27 to 1.22 percent.  The result was a decline in the average effective interest rate on new home loans (which amortizes initial fees over the estimated life of the loan) of 2 basis points to 4.24 percent, the lowest it’s been since August.

While the interest rate changes were very small, the average size of conventional mortgages used to purchase new homes, as well as the price of the new homes purchased with the loans, made notable gains.  The average loan size increased 3.8 percent to $313,400, which represents an all-time high.

Loan Amt Dec13

Meanwhile, the average price of a new home purchased with a conventional loan increased 1.9 percent to $409,500, also an all-time record (although it was nearly as high in April of 2013).

Price Dec13

Because the average loan amount increased by more than the average new home price, the average loan-to-ratio price also increased, from 77.4 to 78.3 percent.

This information is based on FHFA’s Monthly Interest Rate Survey (MIRS) of loans closed during the last five working days in December.  For other details about the survey, see the technical note at the end of FHFA’s January 30 news release.


Rates on New Home Loans Join Downward Trend

December 26, 2013

On Christmas Eve, the Federal Housing Finance Agency (FHFA) reported a 10 basis point decline in mortgage interest rates for the month of November.  Data from FHFA’s Monthly Interest Rate Survey (MIRS) cover conventional single-family mortgages and distinguish whether the loans are for the purchase of new or existing homes.  In October, rates on existing home loans declined while rates on new home loans stubbornly continued to inch up.   But in November, rates on both types of loans declined.  In particular, the November data show a 6 basis point decline in the average contract interest rate on loans to purchase newly-built homes, from 4.32 to 4.26 percent.Contr Rate Nov 13Initial fees have the potential to offset a decline in the contract interest rate, but the initial fees on mortgages for new homes also declined in November, from an average of 1.30 to 1.27 percent.  (Although down from October, this is still relatively high by historical standards, as the average fee on new home loans has only been as high as 1.27 percent five times since 1996.) Fees Nov 13The combination of declines in the contract rate and initial fees took the average effective interest rate on new home loans (which amortizes initial fees over the estimated life of the loan) down 8 basis points to 4.39 percent (after two consecutive months above 4.40).

The November data on conventional new home mortgages showed relatively little change in the average size of the loans ($302,000), the average price of the homes purchased with the loans ($401,800), or the average loan-to-price ratio (77.4 percent).

The MIRS collects data on loans closed over the last five working days of the month. For other caveats and survey details, see the technical note at the end of FHFA’s December 24 MIRS release.


Interest Rates on New Home Loans Remain Stubborn

November 26, 2013

Earlier today, the Federal Housing Finance Agency (FHFA) reported a 4 basis point decline in mortgage interest rates for the month of October.  However, the decline was driven entirely by loans on existing homes.  The average contract interest rate on conventional mortgages for new homes stubbornly refused to follow suit, moving instead in the opposite direction from 4.30 to 4.32 percent.  Although this technically continues the upward trend of the previous four months, October’s 2 basis point change is small and represents a substantial leveling off from the June-September increases that averaged 22 basis points a month.Contr Rate Oct 13Initial fees have the potential to offset a small increase in the contract interest rate, but the initial fees on mortgages for new homes also increased in October, from 1.14 to 1.30 percent.  This is the fourth time fees on new home loans have hit 1.30 percent (or higher) since October of last year (following an extended period when they remained below 1.30 every month from the start of 1997 through September of 2012).  As a result, the average effective interest rate on new home loans (which amortizes initial fees over the estimated life of the loan) increased by 3 basis points to 4.47 percent, the highest it’s been since July of 2011.Init Fees Oct 13Also in October, the average size of conventional loans used to purchase new homes—as well as the price of the new homes purchased with the loans—reversed the previous month’s declines.  The average loan size increased 2.6 percent to $302,500, while the average home price increased 3.4 percent to $401,800.  This marks only the third time in its history that the average price of new homes purchased with conventional loans has been above $400,000.Price Oct 13The result of the price and loan size changes is an average loan-to-price ratio that declined for the second month in a row, from 77.5 to 77.1 percent, the lowest it’s been since March.

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 details about the survey, see the technical note at the end of FHFA’s November 26 news release.


Rates on New Home Loans: Still Rising

October 29, 2013

In September, interest rates on conventional mortgages used to purchase newly built homes increased for the fourth month in a row, according to data released today by the Federal Housing Finance Agency (FHFA).

During the month, the average contract interest rate increased by 10 basis points to 4.30 percent, while initial fees increased to 1.14 percent (from an average of 1.06 percent the previous month).  The combination drove FHFA’s key measure of the average effective interest rate on new home loans (which amortizes the initial fees and incorporates them into the rate) up by 11 basis points to 4.44 percent—the highest it’s been since July of 2011 (the month prior to a substantial 36 basis point drop).

Eff Rate Sep13The FHFA release also includes data on loan size and house prices, and the averages on both for newly built homes declined in September.  The average price of a new home purchased with a conventional mortgage declined by $11,900 to $388,500.  (The average price depends on the mix of new homes purchased with conventional loans during a particular month, in addition to anything that may be happening to house prices in general.)  The average amount of the loans showed an even more pronounced decline of $13,500, taking it down to $294,800.Loan Amt Sep13As the above numbers imply, the average loan-to-price ratio on conventional mortgages used to purchase new homes also declined in September—down to 77.5 percent, after three consecutive months during which it remained above the 78 percent mark.LTP Sep13

This information is based on FHFA’s Monthly Interest Rate Survey (MIRS) of loans closed during the last five working days in September.  Rates and other terms on loans are usually set 30 to 45 days before the loans actually close.  For other caveats and limitations of the survey, see the technical note at the end of FHFA’s October 29 news release.


New Home Loans: Rates & House Prices Both Up

September 27, 2013

In August, interest rates on conventional mortgages used to purchase newly built homes increased for the third month in a row, according to data released yesterday by the Federal Housing Finance Agency (FHFA).  After rising by roughly 1 tenth of a percentage point in June and roughly 4 tenths in July, the average contract interest rate on conventional loans for newly built homes increased by another 26 basis points in August, to 4.20 percent.Rate C Aug13The average initial fee on the new home loans dipped slightly, from 1.11 to 1.06 percent.  That was  not nearly enough to offset the increase in the contract rate, so the effective rate on the loans (after amortizing the initial fees) also increased by 26 basis points, to 4.33 percent.  Meanwhile, the average term on conventional new home loans continues to hover around 28 and half years (28.6 years in August).

Rate E Aug13After the August increases, both the contract and effective rates on new home loans were higher than they’ve been at any time since September of 2011.

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 for the second month in a row, to $308,300, while the loan-to-price ratio remained relatively constant at 78.7 percent.  As implied by those numbers, the average price of new homes purchased with conventional loans increased by $6,000, to $400,400—marking only the second time in 2013 that the price has been as high as $400,000.  This is generally consistent with the upward price trend in the Census Bureau’s series on New Home Sales.Price Aug13The information in this post is based on FHFA’s Monthly Interest Rate Survey of  loans closed during the last five working days in each month.   Rates and other terms on loans are usually set 30 to 45 days before the loans actually close.  For other caveats and limitations of the survey, see the technical note at the end of FHFA’s September 27 news release.


Consumers Expecting Higher Interest Rates

September 4, 2013

Another set of monthly mixed results for consumer confidence was reported as the Consumer Sentiment Index decreased while the Consumer Confidence Index increased slightly.

According to Thomson Reuters and the University of Michigan, the Consumer Sentiment Index fell in August by 3 points from the previous month’s six-year high of 85.1. Meanwhile after declining in July, the Conference Board reported that the Consumer Confidence Index increased slightly by 0.5 points, 0.6%, on a month-over-month seasonally adjusted basis in August to 81.5.

After sustained gains in both indices at the end of 2012 and the start of 2013, both measures of consumer confidence have leveled off in recent months as slow growth continues for employment and the national economy.

Chart_1

According to the Conference Board, the share of consumers planning to buy a home in the next 6 months fell slightly in August. The share of consumers planning to buy a home in the next 6 months fell by 0.1 percentage point to 5.8% on a seasonally adjusted 3-month moving average basis. Over this same period, the share of respondents planning to purchase a “lived-in” home was 3.6% and the share of respondents planning to purchase a new home was 1.1%.

Chart_2

The 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 in August by 5.4 percentage points to 66.2% on a seasonally adjusted 3-month moving average basis. The last time consumer expectations for higher interest rates were this high was September 2006.

Chart_3


Rates Rise Again on Loans for New Homes

August 30, 2013

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.