The accompanying tables present historical summary data from the Federal Housing Finance Board's Monthly Survey of Rates and Terms on Conventional Single-Family Nonfarm Mortgage Loans. This survey is required by law, and has been conducted by the Federal Housing Finance Board since October 1989. Previously, the survey was conducted by the former Federal Home Loan Bank Board. The survey is the nation's most comprehensive source of information on conventional mortgage rates and terms.

The tables are saved as wk1 files. To access these files, first save them to your computer, then open the files in a spreadsheet program.

The real estate market was very active in 1997, similar to 1996. In fact, the annual homeownership rate, at 65.7 percent, broke the all-time record set 17 years ago. The number of housing units authorized (1.4 million) were 1 percent higher than 1996. Housing units started (1.5 million) were unchanged from 1996. Except for last year, both of these figures remain higher than in any other year since 1988. Existing single-family home sales totaled 4.2 million during 1997, setting a new record, up from 4.1 million in 1996. Strong real estate activity during 1997 resulted from relatively low mortgage interest rates that declined further during the second half of the year.

Lower Interest Rates

The most noted mortgage market development in 1997 was the decline of mortgage rates. The contract rate on the composite of all mortgage loans closed (fixed- and adjustable-rate) decreased to 7.26 percent in December 1997 from 7.49 percent in December 1996. The average contract rate on fixed-rate loans decreased 35 basis points to 7.40 percent, while the average contract rate on adjustable-rate mortgages (ARMs) decreased by 23 basis points to 6.53 percent. The average rate on 30-year, fixed-rate mortgages decreased by 36 basis points to 7.41 percent during 1997, while the average rate on 15-year, fixed rate mortgages decreased by 39 basis points to 7.22 percent.

The ARM share declined to 16 percent in December of 1997 from 26 percent in December of 1996 as consumers took advantage of lower fixed-rate mortgage rates. This is the second lowest ARM share since February 1996 when the ARM share was 14 percent, the lowest share since the survey incorporated this data beginning in 1986.

Mortgage interest rates increased during the first half of the year, while declining during the second half of the year. On an annual basis, mortgage interest rates declined during 1997 compared with 1996. The annual average effective mortgage rate for all types of loans decreased for the second consecutive year. The effective rate includes the effect of initial fees and charges amortized over a 10-year period. The 1997 annual average rate of 7.68 percent was lower than the 1996 rate of 7.74 percent and much lower than the 1984 rate of 12.48 percent. The annual average effective rates on adjustable-rate loans and on fixed-rate loans in 1997 were 6.90 percent and 7.89 percent.

The annual median home price increased to $140,000 in 1997 from $131,900 in 1996. Although interest rates decreased during 1997, housing costs for the consumer were higher as the result of the increased home prices. For example, the monthly payments on a fixed-rate, 30-year loan, assuming the 1997 median home price of $140,000, the average contract rate of 7.76 percent, and a 20 percent down payment, would be $803.16. The same loan, taken using the 1996 median home price of $131,900 and average contract rate of 7.86 percent, would result in monthly payments of only $763.99. In this example, the mortgage-payment difference was 5.1 percent, and would cost the borrower an additional $470.04 a year.

Loan-to-Price Ratios Remained Under 80 Percent

The average loan-to-price ratio for all loans stayed between 78.3 percent and 79.9 percent during 1997. After loan-to-price ratios of more than 80 percent in the later half of 1994 and the first half of 1995, this ratio has remained at historical levels over the past two years. The loan-to-price ratio increased slightly from one year ago to 79.9 percent in December 1997, from 78.8 percent in December 1996.

On an annual basis the proportion of loans with high loan-to-price ratios (greater than 90 percent) was 25 percent in 1997, the same as in 1996.

The average mortgage loan amount increased to $126,600 in 1997 from $118,700 in 1996, while the average purchase price increased to $164,500 in 1997 from $155,100 in 1996.

Term-to-Maturity Remains Largely Unchanged

The average term on all loans closed in 1997 was 27.5 years, compared with 26.9 in 1996. This average term has fluctuated in a narrow range between 25 years and 28 years since 1975. For 1997, 10.9 percent of the loans had a 15-year maturity, compared with 12.6 percent in 1996, and 82.9 percent had a 30-year maturity, compared with 79.4 percent in 1996.

Initial Fees and Charges Increased

The average initial fees on all loans increased slightly to 0.98 percent of the loan balance in 1997, from 0.97 percent in 1996. Generally, initial fees as a percent of the loan balance have been declining since the middle 1980's, when such fees were more than 2.5 percent of the loan balance. The downward trend in initial fees reflects both the easing of mortgage market conditions and the increased popularity of no-point, purchase-money mortgages. During 1997, initial fees were slightly higher than last year as more consumers were willing to pay points in order to obtain a lower mortgage rate. In 1997, 21.1 percent of all loans were no-point mortgages, a decrease from 31.4 percent in 1996.

The percentage of loans with adjustable rates declined to 22 percent during 1997 from 27 percent in 1996. At the same time 1-year Treasury ARMs increased as a proportion of the ARM market, to 64 percent in 1997 from 53 percent in 1996. The percentage of the ARM market linked to the District 11 Cost-of-Funds Index (COFI) decreased to 11 percent from 14 percent in 1996. Other Treasury and other COFI ARMs as well as other non-traditional ARMs decreased to 25 percent of the ARM market in 1997 from 33 percent in 1996.

Conforming Loan Amount

As required by law, the data from this survey is used by the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) in determining the conforming loan limit, which is the maximum size of mortgage loans these secondary market agencies can purchase or guarantee. These agencies increased the 1998 limit to $227,150 from the limit of $214,600, which was used in 1997.

The Fannie Mae Charter Act and the Federal Home Loan Mortgage Corporation Act contain identical provisions for the indexing of the conforming loan limit. The provisions allow Fannie Mae and Freddie Mac to adjust the limit effective each January by the percentage increase in the October-over-October average single-family home price.

As a result of the limit, adjustable-rate mortgages are used more often when the principal balance is above the limit. Fifty percent of loans above $214,600 are ARMs compared with 19 percent for loans of $214,600 and below. Lenders serving the market for loans with mortgages over $214,600 may need to hold these loans in portfolio since these loans are less easily sold on the secondary market. In order to guard against interest-rate risk to the lender, the loans in this market segment more frequently have adjustable rates.

House Prices

The accompanying tables contain series on average house prices for the nation, Federal Home Loan Bank districts, States, and metropolitan areas. They also contain annual median house prices for the nation, Federal Home Loan Bank districts, and States for 1992-97. The user is cautioned about small sample sizes from some smaller states. These series should not be the sole data source used to determine regional house price trends.

Features of the Survey

The reported information is based on fully amortized mortgage loans used to purchase single-family nonfarm homes. Loans used to refinance houses are excluded, as are nonamortized and balloon loans. The survey reports only conventional mortgages, and thus excludes mortgage loans insured by the Federal Housing Administration (FHA) or guaranteed by the Veterans Administration (VA). Because homes financed with FHA or VA mortgages are lower priced than those financed with conventional mortgages, the reported house prices should not be interpreted as applying to all single-family homes.

The individual loan information is collected from a sample of mortgage lenders, including savings and loan associations, savings banks, commercial banks, and mortgage companies. Individual loans are weighted according to lender type and geographic location. The total sample of loans for 1997 exceeded 180,000. There were 317 mortgage lenders participating in this survey in 1997.

Adjustable-Rate Mortgage Index

The "National Average Contract Rate for the Purchase of Previously Occupied Homes by Combined Lenders" is a popular adjustable-rate mortgage index, which dates to 1980, and is derived from this survey. In 1997, the rate decreased to 7.26 percent in December from 7.55 percent in January.

Historical data on this index is available from the Office of Policy of the Federal Housing Finance Board, and the current index is available on a telephone recording ((202) 408-2940).

The Federal Housing Finance Board has established a new telephone line that gives recorded information on the current value of many of the interest rates reported in the monthly release. That phone number is (202) 408-2624.

Questions about the survey and the data, or requests to be placed on the mailing list for the monthly release, should be directed to the Office of Policy, Federal Housing Finance Board, 1777 F Street N.W., Washington D.C. 20006 ((202) 408-2967).

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