1 in 10 borrowers now opting for an adjustable rate
NEW YORK – Jan. 29, 2019 – Fixed mortgage rates have been inching lower in recent weeks, but the percentage of borrowers tempted by the even-lower rates of adjustable-rate mortgages (ARMs) is rising.
ARMs posted their highest share of total originations in December since Ellie Mae, a maker of software used to process mortgage applications, began tracking them in 2011.
The share of ARMs reached 9.2 percent in December 2018, up from a 5.6 percent share a year earlier, according to the Ellie Mae's December Origination Insight Report, according to Mortgage News Daily. With a fixed-rate mortgage, the interest rate does not change over the term of the loan; with an ARM, the interest rate is usually locked in for a set period, such as five to seven years, and then changes based on market conditions.
Last week, five-year ARMs averaged 3.90 percent, Freddie Mac reports.
"With the strong demand for housing and rapid increase in property value appreciation, more consumers are turning to adjustable-rate mortgages in order to gain additional flexibility when competing for a home," says Jonathan Corr, president and CEO of Ellie Mae. "This is another key indication of how demand has outpaced supply in the housing market as consumers pursue their dream of homeownership."
Overall, mortgages for home purchases comprised 70 percent of mortgage originations in December, according to Ellie Mae's report. Closings moved faster, too. The time to close on a purchase loan fell to 47 days in December.
Source: "More Buyers Turning to ARMs to Achieve Ownership," Mortgage News Daily (Jan. 24, 2019)
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