Survey: ARMs now offer less interest-payment savings

An article on Inman News today discusses how the Fed's rate changes have affected adjustable rate mortgages.

"Consumers are getting smaller interest-payment savings on adjustable-rate mortgages compared to fixed-rate loans now that the Federal Reserve has raised short-term interest rates, a study of such loans has found. The Freddie Mac 22nd annual adjustable-rate mortgage survey, released today, also found that greater lender discounts for introductory ARM rates are now in effect and hybrid ARMs are increasingly popular compared to one-year adjustables."

"This phenomenon is reflected in mortgage pricing as well. First-year rates on 1-year ARMs rose a full percentage point over the year … while rates on 30-year fixed-rate loans were up about one-half of a percentage point"

"Over the last several years, annually adjusting ARMs with an initial "fixed-rate" period of more than one year, known as "hybrid" ARMs, have grown in popularity. Within that product type, ARMs with an initial fixed-rate period of five years, known as "5/1" ARMs, have been the dominant choice of consumers. "In 2005, two-in-five ARMs were 5/1 hybrids."