Mortgage Rates Drop for 7th Month in Row
Mortgage rates fell again last month, the seventh consecutive decline, although the drop was not as substantial as in March, the Federal Home Loan Bank Board said Wednesday.
The bank board said rates fell on both fixed-rate and adjustable-rate mortgages, hitting their lowest levels since the agency began tracking them separately in the fall of 1983.
The board said lenders were offering a 10.57% average effective interest rate for fixed-rate conventional mortgages in April. In March, rates had plunged even more rapidly, falling to 10.83%, more than one-half percentage point below the 11.36% rate in February.
The most popular form of adjustable-rate mortgages, those that restrict rate increases, fell to 9.68% in April, down from 9.84% in March. Variable-rate mortgages with no cap on how much rates can increase dropped to 9.51% in April, compared to 9.62% in March.
The latest round of mortgage rate declines began last October and has accelerated this year, spurred on by the dramatic plunge in oil prices, which eased inflation worries in financial markets.
The declines have spurred a boom in housing sales and construction plus a stampede by many homeowners to refinance existing mortgages that were purchased during the early 1980s, when mortgage rates soared to above 18%.
The popularity of adjustable-rate mortgages continued to decline in April, with their share of total loans dropping to 29%. ARMs had 50% of the market just a year ago, and the April figure was the lowest level since May, 1983.
The rates on the bank board survey, taken in early April, are for loans on new homes where the mortgage covers at least 75% of the purchase price. The rates are the effective interest rate, which includes any fees or “points” that lenders add on.
A more recent weekly survey done by the Federal Home Loan Mortgage Corp. found that the average fixed-rate loan rate, without taking into account add-on fees, was 9.90% last week. While this was up slightly from a 9.86% average in the week before, it was substantially below the 13.07% rate of a year ago.
In a related development, a House subcommittee was told that the heavy demand for mortgages backed by the Veterans Administration threatens to deplete the agency’s loan guarantee authority for the second time this year.
If the high volume of applications continues, the VA’s $18.2-billion loan guarantee authority will expire in June, forcing the agency to stop accepting applications for new mortgages, said R. J. Vogel, the VA’s benefits director.
Vogel’s testimony before the House Veterans Affairs housing and memorial affairs subcommittee followed approval by the Senate on Tuesday to raise the VA’s guarantee authority to $30.9 billion.