Tag Archive: arm

May 09

LIBOR Adjustable Rate Mortgages (ARM) Return

May 9,2011, adjustable rate mortgages returned to our rate sheet today.  Could this be a sign that things are settling down in the mortgage industry?  I see it as a good sign.  We have not offered ARM’s for a couple of years now.  For awhile they were still listed but with interest rates higher than fixed rate mortgages, then they were removed from our product list entirely.  Historically adjustable rates started much lower than fixed rates.

Today the difference is not as large as in the past but still enough to make them useful in some instances.  Our 5/1 ARM for example has a start rate about 1% lower than the 30 year fixed rate.  If the intended holding period is less than five years the difference could be substantial.  

If the holding period exceeds five years then the current low fixed rates are hard to beat.  

The current ARM indexes are currently the lowest I remember them.  The 1 year LIBOR index was .746 today, that is the lowest it has been since 1989 which was the oldest published rate on the chart at Mortgage-X.  

I am pleasantly surprised that rates have remained as low as they have and they are so incredibly low it is perplexing.  There doesn’t seem to be any problems in terms of availability of funds and yet demand remains low as well.  Strange times.