Adjustable-rate mortgages (ARMs) are making a comeback in the housing market. These loans accounted for 9.2 percent of all new mortgage loans in December 2018.
Month-over-month, the share grew 0.3 percent; annually, the share of ARMs grew 3.6 percent, according to the Origination Insight Report from Ellie Mae, loan processor for 35 percent of all U.S. mortgages. The December reading was the highest share the software company recorded since it first started tracking loans in 2011. The Washington Post reports that today's ARMs are typically hybrids--30-year loans with a fixed rate for five to 10 years, and then the rate adjusts annually for the remainder of the loan term.
When mortgage rates rise, ARMs become more popular with buyers who want to keep their payments lower during the early years of the loan. ARMs are identified as 5/1, 7/1 or 10/1 to designate the initial fixed period and how often the loan adjusts after the fixed period.
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