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.


Mortgage Delinquency Rates Fall

May 20, 2014

Data released by the Mortgage Bankers Association (MBA) indicates that the delinquency rate for mortgage loans on one-to-four-unit residential properties, considered single-family properties, decreased to a not seasonally adjusted rate of 5.69% of all loans outstanding at the end of the first quarter of 2014, 106 basis points below the 6.75% delinquency rate recorded in the first quarter of 2013. This level represents the lowest level since the first quarter of 2008.

According to MBA’s National Delinquency Survey, the four-quarter decrease in the delinquency rate reflected a decline across each stage of delinquency. In addition, the foreclosure inventory also fell. As Figure 1 below illustrates, the percentage of all loans past due fell by 106 basis points over the past four quarters. Loans 30-59 days past due fell by 45 basis points, loans 60-89 days past due fell by 15 basis points, and loans 90 or more days past due decreased by 45 basis points. The foreclosure inventory fell by 90 basis points over the past four quarters. In sum, the serious delinquency rate, the portion of loans either 90 or more days late or in the foreclosure inventory decreased by 135 basis points over the past year.

Presentation1

The recent four-quarter decline in the portion of loans that are seriously delinquent furthers a trend in place since 2010. Figure 2 compares the share of loans that became seriously delinquent based on their origination year with the annual average serious delinquency rate. According to this illustration, the share of single-family loans considered seriously delinquent peaked in 2010 at 9.0%. Since 2010, the proportion of seriously delinquent mortgages has fallen to 5.8%.

The extended decline in the percentage of loans considered seriously delinquent partially reflects a decrease in serious delinquency among loans originated in more recent years. According to the figure below, an average of 4.0% of loans originated in 2005 became seriously delinquent. However, 10.6% of loans originated in 2006, 11.5% of loans originated in 2007, and 6.4% of loans originated in 2008 ultimately became seriously delinquent. In contrast, 1.0% of loans originated in 2009 became seriously delinquent. Since 2010, less than 1.0% of originated loans have become seriously delinquent.

Presentation2


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.