INTEREST RATES FOR HOME FINANCING.

Prior to the present decade, the deficiencies of the financial system gave rise to uneconomical lending terms and to excessive rates of interest on home loans. The pronounced and continued upward sweep of the secular trend during the twenties deferred the inevitable consequences, but the ensuing crisis brought the shortcomings into sharp focus. The repercussions were national in scope and set into action various measures of reform to give relief to home owners. This paper presents a summary of the activities of the Federal Home Loan Bank System, the Home Owners' Loan Corporation, the Federal Savings and Loan System, and the Federal Housing Administration. The influence of these agencies on interest rates is discussed, followed by an analysis of the justification of the existing rate level. It is shown that present rates are no longer the result of free market activity but are governed primarily by the rate established on FHA insured loans. There is now some question of the adequacy of rates to cover the attending costs of home-financing institutions. [ABSTRACT FROM AUTHOR]