Last year, just three percent of purchase-money conventional loans were adjustable-rate mortgages, according to Freddie Mac’s 26th Annual Adjustable-Rate Mortgage (ARM) survey of prime loan offerings.
That’s the smallest annual share since the Federal Housing Finance Agency began keeping track in 1982, and nowhere close to the 62 percent share seen in 1984 when inflation and long-term interest rates were high.
Only 1 percent of FHA loans issued during its fiscal year ending September 30, 2009 were ARMs.
“Fixed-rate lending has dominated the home mortgage market over the past year because of the 50-year low in interest rates for this product and the comfort that a fixed principal-and-interest payment assures the consumer,” said Frank Nothaft, Freddie Mac chief economist, in a release.
“While ARM lending has been limited, those consumers who prefer an ARM generally have many lenders and products to choose from. The most offered product in the survey was the 5/1 ARM, where more than four out of five ARM lenders quoted rates. The 5/1 hybrid has a fixed rate for five years and then adjusts annually afterwards.”
The one-year ARM used to dominate the mortgage market, with all banks and mortgage lenders who originated ARMs offering it back in 1997.
In 2009, only 23 percent of ARM-lenders carried the product; a similar number of lenders offered a one-year jumbo loan product, down from 35 percent in 2008.
I guess we won’t have to worry about as many interest rate resets…
Check out the mortgage rate snapshot below: