WASHINGTON — The Veterans Administration announced Friday that it was lowering the maximum interest rate on federally backed VA mortgages by one-half percentage point to 9%, the lowest it has been in eight years.
The change, which takes effect Monday, is the seventh rate cut in the past 18 months. The VA said in a statement that the reduction was being made to move the agency's rate closer to market interest rates.
The VA said it was also decreasing by one-half percentage point other loan rates. These include a new rate of 9.25% for graduated payment mortgages and 10.5% for home improvement loans. The rates apply to new loans, not existing ones.
The rate drop is the first reduction since March 3, when the VA rate was reduced a full percentage point to 9.5%. The new rate of 9% is the lowest since June 28, 1978.
The VA program, begun in 1944, has helped about 12 million veterans buy homes, with another 28 million veterans eligible for VA loan guarantees.