Fixed mortgage rates are actually inching lower in recent weeks, however the percentage of borrowers tempted by the even-lower rates of adjustable-rate mortgages (ARMs) is increasing.
1 in 10 borrowers currently selecting an adjustable rate
ARMs posted their highest share of total originations in December since Ellie Mae, a maker of software utilized to process mortgage applications, began tracking them in 2011.
The share of ARMs reached 9.2% in December 2018, up from a 5.6% share last year, as reported by the Ellie Mae’s December Origination Insight Report, according to Mortgage News Daily. With a fixed-rate mortgage, the interest rate will not change over the term of the loan; using an ARM, the interest rate is usually locked in for a period of time, for instance five to seven years, and then changes in accordance with market conditions.
Last week, five-year ARMs averaged 3.90%, 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 home-ownership.”
Overall, mortgages for home purchases comprised 70% of mortgage originations in December, as reported by Ellie Mae’s report. Closings moved faster, too. The time to close on a purchase loan fell to 47 days in December.
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