The Department of Veterans Affairs said Friday it is lowering its maximum interest rate for federally backed VA home mortgages by one-half percentage point to 9.5 percent, effective Monday.
"This should provide a significant stimulus to the housing market and the economy as a whole," said Secretary Edward J. Derwinski.The new rate is for home and condominium loans. It means the monthly payment for principal and interest on a typical VA loan of $80,000 will total $672.29, down $29.37 a month from the previous rate.
The department increased the rate from 9.5 percent to 10 percent last February.
The department also lowered the rates for manufactured homes to 12 percent; graduated payment mortgages, to 9.7 percent; manufactured home and lot combination loans, to 11.5 percent; manufactured home lots only, 11.5 percent; and home improvement loans, to 11 percent.
It said that in the fiscal year ended Sept. 30, it guaranteed 196,600 home loans totaling $15.8 billion, compared with 188,000 home loans totaling $14.4 billion in the previous year.
VA home loan guarantees may be used to purchase, improve or refinance a house or condominium and to purchase or refinance a manufactured home.