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Adjustable rate mortgages at record lows

Freddie Mac recently announced that adjustable-rate mortgages are at an all-time low.

Freddie Mac recently announced that adjustable-rate mortgages are at an all-time low.

Freddie Mac recently released its 28th Annual Adjustable-Rate Mortgage Survey of prime loan offering, which showed the adjustable-rate mortgage initial-period rates are at record lows.

The survey, which was conducted January 3 through 5, showed that hybrid ARMs have consistently remained the most common adjustable-rate product in the market.

The 5/1 hybrid ARM has continued as the most popular product that is offered by lenders, with the next most popular products being the 3/1 and 7/1 hybrid ARMs.

"Borrowers who have taken out ARMs generally prefer hybrids, because these products include an extended initial period where the interest rate is fixed," said Frank Nothaft, vice president and chief economist of Freddie Mac. "In June 2004, ARMs hit a peak share of 40 percent of the home-purchase market but by early 2009, that share had fallen to just 3 percent, according to the Federal Housing Finance Agency. We are expecting ARMs to gradually gain back some favor with mortgage borrowers rising to a 14 percent share of the home-purchase market in 2012."

Freddie Mac also recently released its 2012 U.S. Economic and Housing Market Outlook, which showed mortgage rates are projected to remain low in the beginning of 2012, making the relocation cost more affordable, and home sales will grow between 2 and 5 percent year-over-year.