FHFA Mortgage Rates Index Finishes 2012 with Final Decline

After steadily dropping throughout the year, mortgage rates closed out 2012 with one final monthly decline, according to the ""Federal Housing Finance Agency's"":http://www.fhfa.gov/ (FHFA) December ""index"":http://www.fhfa.gov/webfiles/24921/MIRS_Jan_2013_final.pdf.

[IMAGE]

The contract rate on the composite of all mortgage loans (both fixed- and adjustable-rate) was 3.28 percent in December, down from 3.36 percent in November. The effective interest rate, which reflects the amortization of initial fees and charges, was 3.42 percent, down from 3.49 percent the previous month.

The average interest rate for conventional, 30-year fixed-rate loans with conforming balances ($417,000 or less) fell 7 basis points to 3.47 percent in December, FHFA [COLUMN_BREAK]

reported. These results reflect loans closed during the last week of December. Because the interest rate on a loan is determined 30 to 45 days before closure, the reported rates show market conditions in mid- to late-November.

Meanwhile, the national average rate for the purchase of previously occupied homes by combined lenders--used as an index in some adjustable-rate mortgage (ARM) contracts--was 3.29 percent in December, down 7 basis points from November.

Initial fees and charges were 1.15 percent of the loan balance in December, up 7 basis points month-over-month. Fifteen percent of the purchase-money loans originated in December were ""no-point"" mortgages, down from 16 percent in November.

According to FHFA's data, the average term in December was 27.4 years, about the same as November, while the average loan-to-price ratio was 76.3 percent, up from 75.7 percent. The average loan amount was $274,100, an increase of $1,800 from November.

FHFA's data does not include loans insured or guaranteed by the ""Federal Housing Administration"":http://portal.hud.gov/hudportal/HUD?src=/federal_housing_administration (FHA) or ""Department of Veterans' Affairs"":http://www.va.gov/ (VA). It also does not include refinances or balloon loans. December's report has no data on ARMs ""due to insufficient sample size,"" according to FHFA.