Current Mortgage Rates

Saturday, September 06, 2008



An adjustable rate mortgage, variable rate mortgage or floating rate mortgage is a mortgage where the interest rate on the note is periodically adjusted based on an index. This is done to ensure a steady margin for the lender, whose own cost of funding will usually be related to the index. Consequently, payments made by the borrower may change over time with the changing interest rate (alternatively, the term of the loan may change). This is not to be confused with the graduated payment mortgage, which offers changing payment amounts but a fixed interest rate.

Other forms of mortgage loan include interest only mortgage, fixed rate mortgage, negative amortization mortgage, discounted rate mortgage and balloon payment mortgage. Adjustable rates transfer part of the interest rate risk from the lender to the borrower. They can be used where unpredictable interest rates make fixed rate loans difficult to obtain. The borrower benefits if the interest rate falls and loses out if interest rates rise. ARM Terminology:

  • Index: An index is a guide that lenders use to measure interest rate changes. Common indexes used by lenders include the activity of one, three, and five-year Treasury securities, but there are many others. Each ARM is linked to a specific index.
  • Margin: Think of the margin as the lender's markup. It is an interest rate that represents the lender's cost of doing business plus the profit they will make on the loan. The margin is added to the index rate to determine your total interest rate. It usually stays the same during the life of your home loan.
  • Adjustment Period: The adjustment period is the period between potential interest rate adjustments.
Consider an Adjustable Rate Mortgage if you:
  • Want or need more home than you can qualify for now at a fixed rate.
  • Are confident your income will increase.
  • Plan on moving within seven years of buying your home.
What else should you know about ARMs? If the starting rate is very low compared to others, you're probably getting a "discounted" rate. In that case, even if market rates stay the same, your payments will go up when it's time to adjust.



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Current Mortgage Rates*

Loan Type
National Average
30-yr. fixed6.38%
30-yr. fixed jumbo7.00%
15-yr. fixed5.88%
15-yr. fixed jumbo6.50%
7/1 ARM6.25%
5/1 ARM6.00%
3/1 ARM5.88%
1-yr. ARM6.00%
1-yr. LIBOR ARM5.50%
10/1 ARM7.88%
*Mortgage Rates Updated: 09/04/2008