percent, plus 0.5 percent mortgage insurance premium. On loans guaranteed by the Veterans' Administration, the maximum interest rate is 4 percent. Since these maximum interest rates apply uniformly to all sections of the country, the activity of these three Federal agencies in the home mortgage field has operated to level out mortgage interest rates for different parts of the country. Both the Federal Housing Administration and the Federal Home Loan Bank Administration have operated to make credit available to areas more remote from centers of savings, the former by making it feasible for national lending institutions to lend in such areas and the latter by providing savings and lending institutions and secondary credit for such areas.

Table 111 shows a frequency distribution of interest rates for 1940 on all outstanding first mortgages reported on existing one-family non

farm owner-occupied properties. These data are also from the Housing Census of 1940. It should be noted that for 44.6 percent of the total number of mortgages, the interest rate was 6 percent. The distribution also indicates that for almost threefourths of the mortgages, the interest rates were in the range from 5 to 6 percent, inclusive. Data on the distribution of interest rates as indicated above are also available for individual cities and metropolitan districts of 100,000 population or more, for States and for census geographic divisions, from the Bureau of the Census publication, Part IV of the Census of Housing of 1940.

A serious handicap in analyzing interest rates on mortgages for residential properties has been the lack of adequate data. It is hoped that in the future more attention will be directed toward developing adequate statistics for various major localities as well as for the Nation as a whole.

* Less than 0.05 percent.

'An amendment to Section 603, effective May 26, 1942, increased the maximum permissible mortgage principle for a single-family home from $4,000 to $5,400. The property valuation distribution reflects this change.

The Veterans' Emergency Housing Act, effective May 22, 1946, amended Section 603 by (a) replacing appraised value with "estimated necessary current cost including land" and (b) increasing the maximum mortgage from $5,400 to as much as $8,100 in high construction cost areas as designated by the administrator. The distribution for 1946 consequently reflects these statutory changes.

Source: Annual reports of Federal Housing Administration, 1940-46.

The proportion of the total new construction that is facilitated with Federal Housing Administration insurance is shown in ch. IV, Part Three, p. 121.

limitations, these data do have several advantages. The data are obtained for all cases in the categories covered and they are obtained on a uniform basis. They are taken from the applications for insurance, from the processing records of a standard underwriting procedure, or from the legal documents involved in the insurance of mortgages as part of routine reports on and analyses of operations.

Annual averages showing trends over a period of years for a number of the characteristics relating to single-family homes are presented in table 112. These data are shown separately for mortgages on new homes and existing homes insured under section 203, and on new homes under section 603. The information on new homes under section 203 is not shown for 1943, 1944, and 1945 because in those years the volume of loans under this section became insignificant and the program was largely superseded by the war housing program under section 603.

Increase in Valuation for New Homes

The average property valuation for new homes under section 603 increased each year through 1945, the average for 1945 being almost 50 percent greater than in 1941 and over 25 percent greater than in 1942. The average mortgage principal showed a similar trend. This trend reflects increased construction costs and land values, as well as statutory changes in the maximum mortgage which the Federal Housing Administration could insure. The maximum mortgage for singlefamily homes in 1941 was $4,000, but this was raised to $5,400 in 1942. The trend in average monthly total payment, which includes principal, interest, mortgage insurance premium, real estate taxes and hazard insurance premium, has been generally upward. This trend has reflected the net effect of the larger principal amount of the average mortgage written, which operates to increase the monthly payment, and which more than offsets the lengthened average duration of loans which tends to reduce the monthly payment.

The average property valuation on new homes registered a further increase in 1946. However, the figures for 1946 are not comparable, from the point of view of trend analysis, with those for prior years because the Veterans' Emergency Housing program, enacted in 1946, introduced the concept of estimated necessary current costs which replaced the appraisal value concept previously used. Moreover, the maximum mortgage per

mitted was raised from $5,400 for all areas to as much as $8,100 in those areas of high construction cost designated by the Administrator.

Table 113 shows annual percentage distributions of the number of mortgages accepted for insurance on new single-family homes by the property valuation, for Federal Housing Administration insuring operations under section 203 and 603 of the National Housing Act. For one thing, these distributions show how far down in the property value scale new homes were built with the assistance of these insuring operations. In the late 1930's, builders, under the section 203 operations, reached down to properties valued at less than $3,000, but only to a limited extent. The largest volume of loans was in properties valued in the middle brackets-$4,000 to $6,000. The proportion in these brackets increased sharply from 1937 to 1942. For the section 603 operation, there has been a marked shift in the concentration of properties from the $4,000 to $6,000 value groups in 1942 to the $5,000 to $7,000 groups in 1945. This upward shift reflects the upward pressure on costs, primarily during the war and also in the first few months following the war. There was a continued shift upward in 1946, but as indicated previously the 1946 figures are not strictly comparable with the data for prior years.

Monthly Payment versus Borrower's Income

Table 114 and chart 28 show the relationship in 1940 of the mortgage payment to the borrower's

family income for new single-family owner occupied homes with mortgage loans insured under section 203. The year 1940 was chosen as the most recent one which would be relatively unin fluenced by the war. While the average relationship of annual payment to annual income was 12 percent in 1940, this relationship ranged from almost 20 percent in the lowest income group to less than 5 percent for the highest income group However, less than 1 percent of Federal Housing Administration insurance operations fell into the extreme groups. The bulk of the business fell in the income groups from $1,500 to $3,000, with the ratio of payment to income slightly above the

average.

The payment figures used in this table include only principal and interest, since similar data on total monthly payments were not available. If taxes and hazard and mortgage insurance premiums were added, the average total payment in 1940 (as indicated in table 112) would be 17.2 instead of 12.0 percent of income. Data are not presented on section 603 operations since information on borrower's income is not available.

1 An amendment to Section 603, effective May 26, 1942, increased the maximum permissible mortgage principal for a single-family home from $4,000 to $5,400, and the maximum term from 20 to 25 years. The total monthly mortgage payment distribution reflects these changes.

The Veterans' Emergency Housing Act, effective May 22, 1946, amended. Section 603 by increasing the maximum mortgage from $5,400 to as much as $8,100 in high construction cost areas as designated by the Administrator. Also, the maximum interest rate was reduced from 41⁄2 percent to 4 percent The distribution for 1946 therefore reflects these changes.

Includes payment to principal, interest, FHA mortgage insurance premium, hazard insurance, taxes and special assessments, and ground rent and miscellaneous items, if any.

Less than 0.05 percent.

Source: Annual reports of Federal Housing Administration, 1945 and 1946.

Inasmuch as the relationships presented in this table are based upon payments of interest and amortization only, they should not be considered as representative of the total housing costs that must be paid from income. Also, these data are on a national basis, and consequently may not be representative of a particular locality.

The distribution of monthly mortgage payments for loans insured under section 603, which are shown in table 115, reflect not only changes in the amount of mortgage loan but also in the terms of the loan. As indicated previously, the mortgage limitation of $4,000 on single-family residences, originally passed in 1941, was raised to $5,400 by amendment in 1942. Also, the original maximum duration of loan of 20 years was raised to 25 by the same amendments. The maximum interest rate previously established by regulation was 41⁄2 percent, and this was lowered to 4 percent by the 1946 amendments to the act. The 1946 amendments also raised substantially the maximum principal amount of mortgage permissible. Consequently, this table has been greatly influenced by changes in the law.