Effective rates for commitments on fixed-rate mortgages (FRMs) declined 13 basis points to 10.82 percent from early September to early October, and effective rates for adjustable rate mortgages (ARMs) dropped 6 basis points to 9.13 percent, the Federal Home Loan Bank Board said.
It was the first month-to-month decline in the ARM rate since April."The decline paralleled the general decline in intermediate and long-term interest rates over the period," said James Barth, chief economist for the Bank Board. "The drop in the rate for FRMs was about double that for ARMs, reducing the spread between the two rates to 169 basis points, the narrowest since March."
The Bank Board said the final average purchase price of homes financed with conventional mortgages in October was $136,900, an increase of 11.2 percent over October 1987.
The current statutory formula establishing the maximum conventional mortgage that can be purchased by the Federal Home Loan Mortgage Corp. (Freddie Mac) and the Federal National Mortgage Association (Fannie Mae) will permit an increase from the current $168,700 to about $187,600 in January 1989, with approval of the boards of directors of these agencies, Barth said.
In contrast to the decline in commitment rates, interest rates on mortgages closed increased for the second consecutive month in early October, reflecting commitments made before the recent dip in interest rates. The effective rate on all loans closed rose 6 basis points to 9.36 percent.