15-Year Mortgages Now Cheaper Than 1-Year ARMs

Freddie Mac released its weekly update on national mortgage rates this morning, showing a slowing, but continued slide, in rates across the board.

For the fourth week in a row, 30-year fixed rate mortgages (FRM) declined, falling one basis point to 3.40%. Shorter-term 15-year FRMs likewise fell for their fourth straight week, dropping three basis points to 2.61%.

Variable rate mortgages were also down. One-year ARMs lost a single basis point, falling to 2.62%. And 5/1 ARMs lost two basis points to reach 2.58%.

Result? It's now cheaper to get a mortgage in which the rate can't possibly go up for the next 15 years, than it is to take out a mortgage whose rate could skyrocket just a year from now.

While not entirely unheard of, this kind of event is exceedingly rare. Freddie Mac spokesman Chad Wandler confirms that in the past 20 years or so, there have really been only two periods in which one-year ARMs cost more than 15-year mortgages -- in late 2000, when the yield curve was inverted, and then again in 2009, when ARM premiums peaked.

This makes the phenomenon, if not exactly an historic first, rare enough to make a blue moon seem commonplace.


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