VA Lowers Mortgage Rate to 9.5%

The Veterans Administration announced Friday that it is lowering the maximum interest rate on federally backed VA mortgages a full percentage point to 9.5%--its lowest level in nearly seven years.

The change, which takes effect Monday, is the sixth rate decline in the past 10 months. It puts the VA mortgage rate below 10% for the first time since April 22, 1979, when it was also 9.5%. VA mortgages have a ceiling of $135,000.

The reduction comes during a week when an emergency bill was rushed through Congress to prevent a shutdown of the entire VA mortgage program, which serves nearly 200,000 veterans annually. The legislation, which is awaiting President Reagan’s signature, will permit the VA to guarantee a maximum of $18.2 billion in home loans during the current fiscal year, which ends Sept. 30.

The agency had faced a shutdown starting April 1 because it would have reached the original ceiling for loans this year of $11.5 billion.

The rate drop announced Friday is the first full percentage point decrease since mid-1982. The VA home loan rate went as high as 17.5%, in 1981.

The VA also is also decreasing by 1 percentage point the maximum rate for graduated-payment mortgages to 9.75% and home improvement loans to 11%. The rates apply to new loans, not existing ones.

In addition, the rates for manufactured home loans also will be decreased--to 12% for house-only loans and 11.5% for loans to purchase either a house with the lot or for a lot upon which a house already owned by the veteran is to be placed.