Mortgage Fees Rise As Interest Rates Fall
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You have likely notices that mortgage rates have sunk into the 5 percent range with some loans being offered for even less. Now we find out that loan rates might actually be lower except that lenders have upped their fees.
The information below from the federal government shows that in March fees and charges rose by three hundredths of a percent. Not a big deal if you’re buying a bag or oranges, but a huge amount of money when one considers the billions of dollars in new mortgage money originated each day. How much? That would be $3 million in extra fees for each $1 billion in loan originations.
Government Numbers
The Federal Housing Finance Agency reports that the average interest rate on conventional 30-year, fixed-rate, mortgage loans of $417,000 or less increased 2 basis points to 5.05 percent in March. The average interest rate on 15-year, fixed-rate loans of $417,000 or less decreased 14 basis points to 4.78 percent in March. These rates are calculated from the FHFA’s Monthly Interest Rate Survey (MIRS)
of purchase-money mortgages. These results reflect loans closed during the March 25-31 period.
Typically, the interest rate is determined 30 to 45 days before the loan is closed. Thus, the reported rates depict market conditions prevailing in mid- to late February. The contract rate on the composite of all mortgage loans (fixed- and adjustable-rate) was
5.05 percent in March up 2 basis points from 5.03 percent in February. The effective interest rate, which reflects the amortization of initial fees and charges, was 5.14 percent in March up 2 basis points from 5.12 percent in February.
No ARMs
The report contains no data on adjustable-rate mortgages due to insufficient sample size.
Initial fees and charges were 0.60 percent of the loan balance in March, up 0.03 percent from 0.57 in February. Forty-three percent of the purchase-money mortgage loans originated in March were “no-point” mortgages, down from forty-seven percent in February. The average term was 28.1 years in March, unchanged from February. The average loan-to-price ratio in March was 74.7 percent, up from 74.4 percent in February. The average loan amount increased by $1,000 to $209,900 in March.
The National Average Contract Mortgage Rate for the Purchase of Previously Occupied Homes by Combined Lenders, used as an index in some ARM contracts, was 5.06 percent based on loans closed in March. This is an increase of 0.02 percent from the previous month.
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