1-Year ARM, 15-Year Fixed Rate Mortgages Reach Record Lows

by: Mark J. Perry

The rate for one-year adjustable mortgages fell to 2.89% this week, setting a new all-time record low going back to April 1986, when weekly data for ARMs started being collected, according to a weekly mortgage market survey released today by Freddie Mac (see top chart above). The average fixed rate for 15-year mortgages fell to 3.50%, the lowest rate in the history of this series, which started in 1991. Rates for the 30-year fixed mortgage fell to a 9-month low this week of 4.32%, which is the lowest rate since mid- November of last year, when the 30-year rate fell to an historic record low of 4.17% (see bottom chart above).

Given those historic low, or near historic low, rates for mortgages, it would seem hard to make a strong case for higher inflation in the coming years. Back in the late 1970s when high inflation really was a problem, the 30-year fixed mortgage rate was approaching 20%. But now with one-year ARMs at 2.89% and 15-year fixed rates at 3.5% (both record lows) and 30-year fixed mortgages at 4.32%, there sure isn't much of an inflation premium incorporated into those record-low mortgage rates.