Ellie Mae: Adjustable-Rate Mortgage Use at 8-Year High

Ellie Mae, Pleasanton, Calif., said borrowers embraced adjustable-rate mortgages at a rate not seen since 2011.

The company’s monthly Origination Insights Report said ARMs rose to 9.2 percent in December, up from 8.9 percent in November and from a 2018 low of 5.5 percent to the highest level since it began tracking data in 2011.

Ellie Mae President and CEO Jonathan Corr said the increase in ARMs correlates to the 30-year fixed rate, which rose to 5.17 for loans closed in December, up from 5.15 the month prior. For FHAs, the 30-year rate increased to 5.20, Conventional rates increased to 5.19 and VA rates rose to 5.01. (This week, the Mortgage Bankers Association reported the 30-year fixed rate at 4.75 percent, up slightly after falling for most of January).

“With the strong demand for housing and the rapid increase in property value appreciation, more consumers are turning to adjustable-rate mortgages in order to gain additional flexibility when competing for a home,” Corr said Jonathan Corr. “This is another key indication of how demand has outpaced supply in the housing market as consumers pursue their dream of homeownership.”

Other report data:

–Time to close all loans increased to 47 days in December, up from 46 days in November. Time to close a purchase loan decreased to 47 days, while time to close a refinance increased to 44 days.

–The percentage of purchase loans rose to 71 percent of total loans in December, up from 70 percent the month prior. Refinance loans fell to 29 percent in December from 30 percent in November.

–Overall FICO scores dropped one point to 726. LTV held at 79 for the fifth month and DTI held at 26/39.

–Conventional loans fell slightly to 64 percent in December from 65 percent in November. FHA and VA loans each rose by 1 percent in December, to 20 percent and 11 percent, respectively.