ARM's days are Over

With narrowing gap between long term fixed rate of mortgages and adjustable rate mortages (ARM), the refinancing activity is slowing down quite a bit. According to Freddie Mac, The interest-rate savings between 30-year fixed-rate mortgages and 1-year ARMs fell about 0.6 percentage point to around one percentage point since January, 2005. Currently, ARMs account for about 30% of new loans. Freddie Mac thinks the share will fall to around 25% by the end of 2006.

ARM rates were mixed in this first week of 2006. Five-year, Treasury-indexed hybrid rates averaged 5.78%, down from 5.79% and up from 5.03% a year ago. One-year Treasury-indexed ARMs averaged 5.16%, slightly up from last week's 5.15%. In first week of 2005, the one-year ARM averaged 4.1%.

The popular 30-year fixed-rate loan averaged 6.21%, down a little from 6.22% a week earlier. The rate averaged 5.77% at this time in 2005. The average for the 15-year fixed-rate mortgage this week was 5.76%. A year ago, the 15-year loan averaged 5.21%.