A Farewell to ARMs?

Rates on fixed-rate mortgages spiked this week, as the rates on adjustable-rate mortgages remained relatively steady, according to a survey by Freddie Mac(FRE Quote).

As people shy away from adjustable-rate mortgages, they're becoming comparatively less expensive.

The average rate on a 30-year, fixed-rate mortgage jumped 32 basis points to 6.04% with an average 0.6 point during the week ended Thursday, according to the survey.

By contrast, the average rate on a one-year Treasury-indexed adjustable rate mortgage fell 2 basis points to 4.98, with an average 0.6 point.

(A basis point is 1/100th of a percentage point.)

More people have been refinancing with fixed-rate mortgages.

Last year, 88% of borrowers with a one-year conforming adjustable-rate mortgage refinanced with a conforming fixed-rate mortgage, according to Freddie Mac's most recent Refinance Product Transition Report. The annual number hasn't been this high since 2001.

"As the spread between long-term fixed-rates and adjustable-rates widens, it's possible we could see a slight increase in the popularity of adjustable-rate mortgages," said Frank Nothaft, Freddie Mac vice president and chief economist, in a release.

But today's spreads hardly rival those of the recent past. The spread between 30-year FRMs and 1-year ARM is 1.06 percentage points. During the runup in housing prices, the spread regularly exceeded two percentage points, and even as recently as last August hit 1.09 percentage points.

Other rates rose on the week.

Rates on 15-year FRMs increased by 39 basis points to 5.64%, rates on five-year Treasury-indexed hybrid adjustable-rate mortgages rose 18 basis points to 5.37% and the rates on one-year Treasury-indexed ARMs remained at 5.03%. Both mortgages had an average 0.5 point.

Freddie Mac surveys lenders about rates on conventional mortgages of less than $417,000 to borrowers with good credit.

The survey doesn't reflect rates on jumbo loans of over $417,000 or loans to borrowers with weak credit.

Freddie Mac's numbers are averages. You can search for the best rates offered by lenders in your area on BankingMyWay.com. Just make sure you understand whether the lender is discounting the rate it quotes you by charging a "point," or fee, based on the size of the loan.