The rising mortgage rates have made it undesirable for many homeowners to refinance their mortgages. Yet there is an option left for them: the adjustable rate mortgage or ARM.
Bankers say ARMs got a bad rap in the mortgage debacle. The riskiest loans - subprime, low down payment, interest-only, negative amortizing and stated income - tended to be ARMs. The mortgage meltdown occurred because those loan features were layered on top of ARMs. In many cases, the adjustable rates didn't get borrowers into trouble; people defaulted on their loans because they didn't put any money down and they exaggerated their earnings when they applied for stated-income loans.
A few months ago, only about 1 percent of mortgage applications were for ARMs. Last week, it was 3.4 percent, according to the Mortgage Bankers Association.
Mortgage rates remain significantly lower than one year ago. This time last year, the average 30-year fixed mortgage rate was 6.48 percent, meaning a $200,000 loan would have carried a monthly payment of $1,261.51. With the average rate now at 5.95 percent, the monthly payment for the same size loan would be $1,192.68, a savings of $68.83 per month for a homeowner refinancing now.
SURVEY RESULTS
30-year fixed: 5.95% - up from 5.65% last week (avg. points: 0.42)
15-year fixed: 5.37% - up from 5.06% last week (avg. points: 0.38)
5/1 ARM: 5.49% - up from 5.20% last week (avg. points: 0.48)
Bankrate's national weekly mortgage survey is conducted each Wednesday from data provided by the top 10 banks and thrifts in the top 10 markets.
