In another sign that mortgage markets are a bit unpredictable lately, this morning’s mortgage rates are virtually identical for conforming fixed rate mortgages and conforming adjustable rate mortgages.
This is an extremely uncommon market condition; usually, adjustable rate mortgages carry lower rates over their initial fixed rate period (i.e. 3 years, 5 years, 7 years) than corresponding 30-year fixed rate loans.
Mortgage pricing varies on a case-by-case basis, but right now, there is little incentive for a mortgage applicant to choose an adjustable rate mortgage today over a fixed rate mortgage, all else equal.
The “teaser rate” offered on an ARM is not really a tease when it’s compared to the fixed rate offerings.
After the release of tomorrow’s Retail Sales and Consumer Sentiment data, this condition could change, of course. The stronger the data, the more likely that fixed rate mortgages will resume their normal rate structure, sitting somewhere higher than what is offered on ARMs.