WASHINGTON — The Veterans Administration said Friday it is raising its maximum interest rate for federally backed VA home mortgages to 10%, the second increase in less than a month.
The increase from the current 9.5% maximum will take effect on Monday.
The VA said graduated payment mortgages also would rise a half-point, to 10.25%, and home improvement loans would go from 11% to 11.5%.
"Current conditions in the financial marketplace made the increase necessary to ensure that funds would continue to be available to veterans seeking to buy or refinance homes," the VA said.
"What they've done is caught up with what's been happening with interest rates for the past couple of weeks in the market," said Bob O'Toole, a vice president of the Mortgage Bankers Assn. Had the rate remained at 9.5%, he said, VA financing would soon become unavailable.