Freddie Mac yesterday afternoon released the results of its 28th Annual Adjustable-Rate Mortgage Survey of prime loan offerings. The GSE conducted the survey from Jan. 3 to Jan. 5.
The numbers showed that ARM initial-period rates are at historically low levels and hybrid ARMs are stil the market's most common ARM product.
The agency also reported that the initial-period rates on ARMs were at the lowest levels recorded in the history of the ARM pricing survey. This is partly a reflection, Freddie Mac stated, of the Treasury yields' low levels that are used as indexes.
The 5/1 hybrid ARM remains the most popular lender-offered loan product. Almost every ARM lender that took part in the survey offered this loan. The next most popular products were the 3/1 and the 7/1 hybrid ARMs, according to the GSE. Less than one-half of lenders offered the one-year adjustable loan, with merely 4% of lenders offering a 3/3 ARM that adjusts once every three years.
In early January 2012, the interest rate savings for the popular 5/1 hybrid ARM versus the 30-year fixed-rate mortgage was roughly 1 percentage point, roughly the same as during January 2011.
There was little difference in the initial interest rate for the 1/1, 3/1 and 5/1 products, Freddie Mac reported. Longer-term hybrid products, including the 7/1 and 10/1 ARMs, were also available from 63% (7/1) and 38% (10/1) of those who took part in the survey. Given the long initial fixed-rate period, spanning seven or ten years, the initial interest rates were priced closer to the rate on a 30-year fixed-rate loan for these products.
Among 121 ARM lenders, the agency said that 65% offered loans were tied to constant-maturity Treasurys, down from 71% in 2011. According to the GSE, the remaining offered products were tied to future rates indexed to Libor.
With the start of the European debt crisis, the one-year Libor rate less the one-year constant-maturity Treasury yield peaked over the week ending Jan. 6 at over 1 percentage point, Freddie Mac noted. This is versus around 0.5 percentage points over the same week in 2011.
Due to this, one-year Libor indexed ARMs might have adjusted up or did not adjust significantly down versus Treasury-indexed ARMs. The uncertainty in terms of LIbor movements might have led some current borrowers to avoid Libor ARMs, the GSE stated.
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