Freddie Mac Report: A Farewell To ARMs

Posted by Orb Staff on May 22, 2009 No Comments
Categories : Residential Mortgage

e Mac has announced that in the first quarter of 2009, more than 99% of prime borrowers who originally had a conforming adjustable-rate mortgage (ARM) chose a new conforming fixed-rate mortgage when they refinanced, up slightly from a revised share of just below 99% in the fourth quarter of last year. Freddie Mac also reports that nearly 100% of borrowers who had a fixed-rate loan refinanced into another long-term, fixed-rate loan, matching the fourth-quarter share. ‘Whether for refinance, as our report shows, or for home purchase, borrowers are shying away from ARM loans in the present environment,’ says Frank Nothaft, vice president and chief economist for Freddie Mac. ‘The lowest fixed mortgage rates in 50 years are attractive by themselves, and when we look at average ARM interest rates that are nearly the same as the fixed rates being offered, it is easy to see why borrowers are making the choice for fixed-rate mortgages. ‘During the first quarter, initial interest rates on 5/1 hybrid ARM loans were as much as a half a percentage point above interest rates on 30-year fixed-rate mortgages,’ Nothaft continues. ‘Rates on one-year ARMs were below those of 30-year fixed rates, but usually by about one- or two-eighths of a point along, with the risk that the rate could be a lot higher in a year or two when the loan resets. Freddie Mac's Primary Mortgage Market Survey recorded three new record lows for 30-year fixed mortgage rates during the quarter, hitting 4.85 percent, with 0.7 points the last week of March.’ The statistics come from a sample of properties on which Freddie Mac has funded at least two successive loans, and the latest loan is for refinance, rather than for home purchase. SOURCE: Freddi

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